Updated to mid-August 2009
Asian market review by Steve Tan, ICIS pricing
Asian propylene prices firmed for most of the second quarter, surprising market participants with its robust demand. Prices hit $1,150/tonne CFR (cost and freight) NE Asia (northeast Asia) on the back of supply tightness in the region.
August was seen to be a tight month in terms of supply, given the end of the turnaround season and the lack of product availability from Asian refineries. Japanese traders with surplus tonnage also bid prices up, buying relatively high priced propylene on an FOB (free on board) basis equivalent to CFR prices.
Korea and Taiwan were the main exporters as producers squeezed out two to three spot lots each month at regular weekly price increases of $30-50/tonne from June till August.
A concurrent rise in domestic propylene and polypropylene (PP) prices in China also allowed buyers to accept higher propylene prices. However, market participants grew increasingly wary in August as the spread between propylene and PP narrowed considerably, thus making propylene relatively expensive.
Southeast Asian markets were generally quiet due to lower price ideas amid tight supply, with prices lagging behind northeast Asia by $30-50/tonne.
European market review by Nel Weddle, ICIS pricing
European propylene tightened quite significantly in the mid-May to mid-August period.
Cracker reductions, a move to lighter feedstocks and reduced rates at refineries had helped to turn the first half year balance from long into short. Demand was much better than expected because of good export opportunities for propylene and its derivatives, notably to Asia.
The June contract settled up €45/tonne at €565/tonne FD (free delivered) NWE (northwest Europe), while July increased €85/tonne to €650/tonne FD because of high upstream naphtha and the tight demand and supply balance.
A number of unplanned cracker outages in July saw spot levels soar as producers were left with no alternative but to buy volume on the open market. Import volume became more attractive even at levels of €800/tonne CIF (cost insurance freight). However, business at these numbers was not considered repeatable and by mid-August, the market was considered to have passed its peak for the time being.
The August contract was established at €685/tonne FD NWE, up €35/tonne from July. The contract was in stalemate for two weeks as other producers failed to follow the settlement as they said it did not adequately reflect the market fundamentals. Suppliers were expected to take a tough stance for the September contract discussions.
US market review by William Lemos, ICIS pricing
US propylene prices remained on an uptrend in August on the back of tight supply and higher refinery-grade propylene (RGP) spot prices.
US producers nominated increases of 3-5 cents/lb ($66-$110/tonne) for August contracts, but settlements were yet to be reached at the time of writing.
US chemical-grade propylene (CGP) contracts in July settled at 39.50 cents/lb, while polymer-grade propylene (PGP) contracts were agreed at 41.00 cents/lb.
Market participants predicted contracts in August would settle at an increase of 1-2 cents/lb.
RGP spot prices in early August were at 39.00-40.00 cents/lb, up from 24.00-27.00 cents/lb three months earlier.
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Propylene
Uses and Outlook
The dominant outlet for propylene is polypropylene (PP), accounting for around 63% of global propylene consumption. PP is one of the most versatile of the bulk polymers due to a combination of good mechanical and chemical properties. Hence its applications are very wide.
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The two main sources of propylene are as a byproduct from the steam cracking of liquid feedstocks such as naphtha as well as LPGs, and from off-gases produced in fluid catalytic cracking (FCC) units in refineries. The remainder of propylene is produced using on-purpose technologies such as propane dehydrogenation (PDH) and metathesis.
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