Northeast Asia propylene uptrend to continue on tight supply

SINGAPORE (ICIS)–Spot propylene prices in northeast (NE) Asia have been on an uptrend for three consecutive weeks and look set to continue rising in the near term due to tight supply amid a revival of demand in the key China market.

At midday, propylene prices stood at $860-880/tonne CFR (cost and freight) NE Asia, unchanged from the previous day. Buying indications were capped at $860/tonne CFR CMP, with some sellers heard to be targeting above $900/tonne CFR NE Asia.

In the week ended 19 May, spot prices were assessed at an average of $847.5/tonne CFR (cost and freight) NE Asia, up by $5/tonne from the previous week, according to ICIS data.

Prices have gained 4.6% from end-April, after losing as much 17.8% from mid-February, the data showed.

Recent gains could be sustained throughout June as supply in northeast Asia has been tight due scheduled turnarounds at regional crackers in the months of May to July.

In Japan, Asahi Kasei Mitsubishi Chemical Ethylene Corp and Mitsui Chemicals have cracker maintenance scheduled between May to July. Their crackers’ combined propylene capacity are said to be around 670,000 tonnes/year.

JXTG Nippon Oil & Energy will take its Sakai fluid catalytic cracker (FCC) off stream for a turnaround in the second half of May, said a source familiar with the matter. The unit, which has a propylene capacity of 105,000 tonnes/year, is expected to be down for about 40 days.

In South Korea, Korea Petrochemical Industry Co’s (KPIC) Onsan cracker, which has close to 240,000 tonnes/year in propylene capacity, is undergoing maintenance since mid-April.

SK Global Chemical’s (SKGC) No 1 fluid catalytic cracker (FCC) in Ulsan with a 120,000 tonne/year propylene capacity will have a turnaround in end-May to early July.

“June prices might go up due to these turnaround works, but July’s supply will be longer,” said a producer.

Regional propylene prices are also supported on the demand side.

In the key China market, buyers could not procure lower-priced domestic cargoes, with some of them forced to increase bids in the import market.

On 19 May, domestic propylene prices in east China were assessed at yuan (CNY) 6,600-6,950/tonne ($958-1,009/tonne), up by an average of CNY225/tonne or around 3.5% from early May, according to ICIS data.

Chinese prices are expected to remain firm on the back of tightened supply and expectations of increased downstream demand, at least up to the end of June.

“From July onwards, I project a weak outlook in China.” said a Chinese producer.

Northeast Asia’s spot propylene prices are partially boosted by producers’ presence in the market to procure cargoes for their respective derivative units, ahead of turnarounds at their crackers. This demand is expected to subside when maintenance works are completed.

The summer months, which starts in June in northeast Asia, could potentially dull downstream demand.

Focus article by Joson Ng

($1 = CNY6.89)

Additional reporting by Doris He

Picture: Qingdao port in China’s Shandong province (Source: Sipa Asia/REX/Shutterstock)