NE Asia propylene may extend falls as China supply grows

SINGAPORE (ICIS)–Propylene spot prices in northeast Asia may continue to fall on expectations of increased supply in the key China market.

In the week ended 13 October, prices were assessed at an average of $962.5/tonne CFR (cost and freight) NE (northeast) Asia, down by $50/tonne from mid-September, when prices were at their highest level this year, according to ICIS data.

Weak post-holiday market sentiment in the region may have caused propylene prices to weaken, with no strong showing expected from the spot market in November, industry sources said.

China had its National Day and Mid-Autumn Festival on 1-8 October, while South Korea celebrated Chuseok or Thanksgiving and a host of other holidays on 1-9 October.

“The Chinese domestic market is expected to be covered by cargoes in the near term. We might see CFR NE Asia prices go below $900/tonne soon,” said a buyer in Mandarin.

Availability of spot cargoes is expected to increase amid talks that an integrated propane dehydrogenation (PDH) unit in eastern China will continue to run when its downstream polypropylene (PP) plant is shut for a two-week turnaround from end-October or early November. This will result in some 15,000 tonnes of propylene that will make their way into the spot market.

In the southeastern Guangdong province, a new fluid catalytic cracker (FCC) in Huizhou with about 250,000 tonne/year of propylene capacity was heard to have some cargoes available, according to market sources. Plant information could not be confirmed with the producers.

Some market participants said the cargoes will be able to satisfy demand in southern China and even in parts of the eastern region.

Meanwhile, import arrivals will also bloat China’s inventory of propylene. Some buyers said they will be unable to procure additional spot cargoes in the near term as their storage tanks are currently full.

The Chinese market will also be well-supplied by cargoes from southeast Asia – where buyers have sufficient stocks up to the second half of November and are showing no interest in spot cargoes.

Meanwhile, South Korean producers insisted that supply for November-arrival spot cargoes to China would be tight and fewer compared with October levels, citing two planned turnarounds at major facilities in Ulsan next month.

Northeast Asia’s propylene prices are also expected to be influenced by China’s domestic propylene prices as well as by market movement in the downstream PP futures and spot markets, industry sources said.

Focus article by Joson Ng

Additional reporting by Doris He

Pictured above: A container ship at Qingdao port in China. (Source: Sipa Asia/REX/Shutterstock)