NE Asia propylene to extend downtrend as China market tumbles

SINGAPORE (ICIS)–Spot propylene prices in northeast Asia may continue to fall for the rest of April amid losses in the Chinese domestic market.

On 21 April, regional propylene prices lost $30/tonne to an average of $810/tonne CFR (cost and freight) NE (northeast) Asia, while China’s domestic prices for the material in Shandong had its biggest weekly fall of yuan (CNY) 500/tonne to CNY6,375/tonne ex-tank, according to ICIS data.

Propylene prices in Asia have shed some 17.8% since mid-February, while prices in the Chinese domestic market fell 18.8% over the same period, the data showed.

Supply in China was generally considered ample and the situation was compounded by Tianjin Bohua Petrochemical’s return to full production at its propane dehydrogenation (PDH) unit.

The PDH unit in Tianjin that can produce 600,000 tonnes/year of propylene resumed production on 9 April after a month-long turnaround.

Demand, on the other hand, was cut in the past two to three weeks as authorities stepped up environmental inspection checks on downstream production units in the Shandong region, removing another critical pillar in a market already lacking in support.

Meanwhile, the key polypropylene (PP) downstream market continued to suffer from less-than-ideal sales and high inventory, resulting in mounting selling pressure for propylene producers in China.

“PP sales, while showing some improvements, is still generally weak. The inventory level is still high,” said one PP producer.

Chinese PP producers have been actively exporting cargoes to southeast Asia and beyond as they could not liquidate their cargoes in China, according to some sources.

More propylene supply would possibly be available in China amid market talks that a major methanol-to-olefins (MTO) unit in the country is set to restart shortly, while a domestic PP unit in an integrated complex was said to have stopped and the producer was looking for a second home for their propylene cargoes initially planned for captive usage.

“They have been calling us up to take cargoes from them every day,” said a buyer of propylene at a downstream producer unit.

In the regional market, northeast Asian producers continued to insist they have tight supply and manageable inventory levels, but there are concerns that traders may start to offload spot cargoes in the final week of April.

China’s domestic propylene prices continue to go south, much to the surprise of many market players.

“We thought the Chinese market would have bottomed out by now,” said one trader.

With the month of April more or less written off by many in the market, it remains to be seen if the market will do better in May.

While a sharp rebound is not expected, some market players expect May could be a month of consolidation.

“With some cracker turnaround coming up in May and June, we may see some support to spot prices in northeast Asia,” said one supplier.

“May could see a brief respite in the domestic market,” said one Chinese buyer but it added it was more of a hope rather than expectation because it was difficult to pick out too much positives at the moment.

Focus article Joson Ng

($1 = CNY6.88)

Additional reporting by Doris He

Picture (top): Aerial view of Port of Shenzhen in China (Source: Imaginechina/REX/Shutterstock)