OUTLOOK ’18: Asia propylene spot prices to gain some support in Q1

SINGAPORE (ICIS)–Spot propylene prices in Q1 2018 could see a slight uptick, mirroring the Q1 performances in the past 2 years. In addition, pre Lunar New Year restocking activities could help give demand a boost.

In the downstream sectors in China, the propylene oxide (PO) market could see a new plant starting up in H1 2018. The Hong Bao Li plant in Nanjing is expected to bring an additional 120,000 tonne/year of demand into the market.

In the acrylonitrile (ACN) market, there are possible plant turnarounds in Q1 2018. In addition, Q1 prices will typically be on an uptrend on seasonal restocking activities.

Oxo alcohols production in China is estimated to be at 3.9 million tonnes in 2018 and demand for propylene is estimated to be at 2.5 million tonnes, compared to 2.4 million tonnes in 2017, according to industry estimates.

In the largest downstream polypropylene (PP) market, producers in China insist that it is not likely to see a major jump in demand for propylene at the start of 2018.

All in all, demand for import volumes in China is unlikely to deviate much from 2017, as buyers may procure material from the domestic market, sources said.

Another salient point to note is the potential environmental checks in China. In 2017, some plants were ordered shut and that caused sudden spikes in spot prices in the propylene market, as well as other sectors.

On the supply side of things, there are limited plant turnarounds in northeast Asia slated to start in Q1 2018. Majority of the planned maintenance will start in Q2 2018.

In China, two propylene production units started in Q3-Q4 2017 in south China and they will ensure that south China would be relatively less dependent on imports compared to the recent years.

Import demand from Japan and South Korea are expected to be subdued in Q1 2018. One major PP unit in Japan is still expected to be shut for the majority of Q1 2018, whereas South Korean spot buyers were generally well-supplied by the domestic market.

Taiwanese spot buyers are expected to continue to buy the usual volumes with supply and demand fundamentals largely unchanged.

Propylene prices in northeast Asia rose some 13.7% from the start of the year to end of December 2017.

The average assessed price was $1,017.5/tonne CFR (cost and freight) northeast (NE) Asia in the week ended 22 December.

Prices peaked on three occasions, in mid-February, early September and end December.

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