Shell Moerdijk blast could change Europe propylene landscape

Focus article by Nel Weddle

LONDON (ICIS)–An explosion at a Shell Moerdijk unit in the Netherlands earlier this week could change the propylene supply and demand landscape for the remainder of 2014, sources said on Friday.

“This explosion is still fresh,” said a source, “and I can think of a number of scenarios depending on the extent of the damage.”

“We think there will be a serious impact,” it added.  

The blast happened at the reactor of the MSPO-2 (styrene monomer/propyleneoxide) installation at the Moerdijk production site around 23:00 central European time (CET) (21:00 GMT) on 3 June.

Shell’s Moerdijk cracker has the capacity to produce 900,000 tonnes/year of ethylene and 500,000 tonnes/year of propylene according to the company’s website.

Several sources said they thought cracker rates would be reduced in the near-term in order to compensate for the loss of outlet but felt that in the medium term, this would add some length to the European system.

“Already before the incident, we saw some real length in the market with some sellers desperate to place cargo, most systems are full at least in first-half June and options for last minute cargoes are very limited,” a second source said.

At least three cargoes arrived from Asia in May having been fixed during a period of extreme supply tightness and sources said that there was “no question” that these had weighed on the market.

Sources also said that an improved performance from ethylene derivatives also meant that cracker operators were no longer under as much pressure to reduce rates.

Several sources said they had been offered spot polymer grade propylene (PGP) by Shell as well as others in the aftermath of the incident but for many the problem was that they were already pretty well covered.

“I have received quite a lot of offers but I am not in a buying position – unfortunately,” said a propylene consumer.

“I have been asked to take an additional barge, but I am trying to push material back into the market as well,” said another consumer who was facing its own lower than expected demand downstream.

“They [Shell] are in the market, but it will be difficult to place tonnes in the first half of June, we are not even getting to the point of discussing prices,” said a third source, “its all about can you take it?”

“Noone knows what the situation is and how long it will take – this could be a game changer as Shell is a big player in the overall propylene market,” a trader said.

It added; “before I would have said the market is balanced to slightly tight, now its balanced and maybe even long.”

Sources said that it was too early to say whether the incident would be a game changer, just that at the very least it had certainly changed the outlook for June.

Spot PGP prices are currently being indicated at June CP (contract price) minus 3-4% on both the coastal and inland market, but many expect discounts at the coast to deepen.

One spot deal is already heard for July at July CP minus 4.5% on a FD ARA (free delivered) (Amsterdam, Rotterdam, Antwerp) basis. Spot prices were at CP flat or even showing a premium back in April.

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