LONDON (ICIS)--There is no evidence of immediate propylene oxide (PO) availability concerns in Europe, despite an unplanned PO plant outage and heat-related or logistical constraints, because these are being mitigated by quieter summer market conditions.
There is some talk that general availability is sufficient for regular coverage at least for the time being. This is despite the unplanned shutdown at LyondellBasell and Covestro’s joint venture PO/styrene monomer (SM) plant at Maasvlakte in the Netherlands, and other heat-related and logistical challenges for certain players.
This is because demand is lower during the summer anyway and also because LyondellBasell has other PO operations in Europe.
Demand is subdued due to several player absences during the holidays. There is also some talk that a more cautious economic sentiment could be influencing buying activity to some extent as well.
However, there is some talk that any additional PO volumes would be difficult to obtain, and there is some expectation that if the unplanned outage were to continue, particularly post holidays, then this could lead to some availability constraints for PO and derivatives. This is particularly as PO is already structurally on the tight side.
One producer, however, said it has already seen some adverse effects on the supply chain and availability of PO derivatives, despite the holidays, but this view was not confirmed in the wider market at the time of writing.
European propylene oxide (PO) formula contract prices edged up marginally in August, on the back of the minor rise in upstream propylene contract costs this month.
European PO contract prices in August were assessed at €1,532-1,582/tonne FD (free delivered) northwest Europe.
Contract fee price discussions for 2019 are underway, and the tendency is likely to be up, with sizeable price rises being talked. Some business has already been booked for 2019 with three digit price rises having been agreed, according to some buying and selling sources this week.
The firmer tendency for contract adders in 2019 is linked to the expectation of a tighter PO supply tendency, amid higher captive requirements for certain players and talk of a heavy slate of cracker and main PO plant turnarounds next year. However, the latter turnaround information has not been officially confirmed.