Bullish costs encourage PP sellers to raise their prices

Following a period of global decreases in PP prices, the steep increases seen in upstream markets have provided ground for PP sellers to look for higher prices over the short term. A noticeable jump in spot propylene prices in Asia, combined with surging crude oil and naphtha costs have already led domestic PP prices to rise in some global markets including China, Southeast Asia and Turkey.

Asian spot propylene prices have been posting incremental increases since early October. As of yesterday, prices were reported at $1010/ton FOB Korea, representing a significant increase of almost $100/ton in a single week. As reported earlier in the ChemOrbis Daily Headline, Propylene prices rebounding in Asia, stock levels in the region are expected to wind down in November as many regional producers are planning shutdowns or capacity reductions based on technical issues and weak refining margins.

Surging crude futures, which posted a $1.08/barrel increase as of October 19 to reach $79.61/barrel, was another factor behind the bullish atmosphere in the PP market. Oil prices hit their highest level of the last 12 months in the day trade, with NYMEX crude breaching the psychologically-significant level of $80/barrel.

Owing to persistently rising upstream costs, along with improving demand, the Chinese domestic market saw some price hikes this week. According to reports from the region, major producers Sinopec and CNPC lifted their prices by CNY100-200/ton ($15-29/ton) following the significant price hikes they implemented last week as an attempt to push up the general market level.

A similar pricing strategy has been witnessed in locally held homo-PP injection and raffia prices in Southeast Asia this week. After implementing significant price reductions in the prior week, sellers in the region's local markets either left their offers stable or attempted to regain some lost ground, implementing increases of up to $35/ton on a weekly basis.  

Boosted by strong upward pressure from higher crude oil and naphtha costs, which have risen by around $80/ton since early October, the Turkish producer Petkim also revised their PP raffia, fibre and injection prices higher by $20/ton as of yesterday, a move which came after the company had announced two consecutive decreases in the previous weeks.