NE Asia propylene could see wide buy-sell gap; thin talks in near future

Author: Joson Ng

2020/08/03

SINGAPORE (ICIS)--Northeast (NE) Asia propylene market is set to see wide gap in bids and offers as producers cite tight supply to raise prices while buyers resist any such efforts.

  • Sellers to take their time in near term
  • Buy-sell gap likely to be wide
  • Possibly only a small group to be active in next 1-2 weeks

The gap is expected to be more pronounced now as September arrival discussions start in the market.

Producers have been waving the flag of tight supply and they will continue to do so for September arrivals.

Several major producers have planned maintenance coming up that would point to tighter spot supply.

Formosa Petrochemical Corp (FPCC), Idemitsu Kosan, Yeochun NCC (YNCC) and SK Global Chemical are starting turnarounds for their crackers from August to October.

In South Korea supply will be particularly tight as a major downstream polypropylene (PP) producer is likely to continue its buying spree well into October.

In China though new propylene supply will mitigate any tightness in the market.

Chinese buyers point to the successful start-up of two propane dehydrogenation (PDH) units in July with a total nameplate capacity of 1,050,000 tonnes/year.

Both units should be able to reach reasonable operating rates in August.

While it is too early to conclude how many spot cargoes the units can potentially contribute to the market - as they are integrated - the impact on sentiment is already evident with some buyers opting to wait before entering the spot market and many expecting import prices to fall.

The third group of market players - possibly a small group - that arguably could dictate price movements in the next couple of weeks because they are willing to do business for September arrivals while others are not.

Even within this small group, market players have different positions and discussion and deal levels could be wider in the coming weeks as the two sides will no doubt pull on both price ends.

ICIS Editorial Chart goes here

Focus article by Joson Ng

(Image: Polypropylene bottle cap; Photo by Mood Board/REX/Shutterstock)