Propylene prices rebounding in Asia

After tracking a downward trend throughout September, spot propylene prices in Asia changed direction and spiked over the past week based on surging naphtha and crude prices, as well as supply concerns due to talks of lower run rates at Japanese, Taiwanese, Korean and Southeast Asian crackers…

After tracking a downward trend throughout September, spot propylene prices in Asia changed direction and spiked over the past week based on surging naphtha and crude prices, which reached $73.27/barrel at the start of this week, as well as supply concerns due to talks of lower run rates at Japanese, Taiwanese, Korean and Southeast Asian crackers.

Having posted around a $20/ton increase over the past week, spot propylene prices in Asia gained an additional $25/ton this week, being cited at around $935/ton FOB Korea as of yesterday. The recent hikes seen in the region were mainly attributed to concerns about low stocks as many regional producers are planning shutdowns or capacity reductions based on technical issues or weak refining margins.

According to market reports, Japan's Nippon Oil, who sells at least 3000-4500 tons/month of propylene, doesn't expect to have any propylene loadings in November as the company has quite low stocks due to a number of shutdowns which stemmed from poor refining margins as well as mechanical issues. In Taiwan, Formosa Petrochemicals is planning almost a month-long shutdown after the second half of October at its No 1 and No 2 crackers, while in Southeast Asia, Indonesia's Chandra Asri is planning to reduce operating rates at its 306,000 ton/year plant in the last week of October due to poor margins.

Similarly, having achieved noticeably higher sales volumes during the months of August and September, producers in South Korea, expect to have less than 30% of their usual monthly volume to sell for November shipment due to low stocks, market sources stated. The planned or unplanned cuts in run rates of some producers including SK Energy, who had lowered their propylene output by 50% from July to August due to repairs, and GS Caltex, who had shut their 240,000 tons/year plant in July and did not supply material in August, were also seen as other reasons behind the winding down of stocks in the region.

Firming upstream costs in Asia, combined with a pick-up in the market activities following the holidays in China, provide support to downstream PP producers to announce post-holiday increases in that country. Accordingly, PP players in China reported some bullish news from the domestic market as a number of suppliers elected to revise their PP offers upward by around CNY200-400/ton ($29-59/ton) this week in an attempt to push up the general market level.