Firming crude oil prices have pulled spot naphtha prices up to a year-high in both Asia and Europe recently, as per ChemOrbis. In the last three weeks, average European spot prices have gained $40/ton on a CIF NWE basis while Asian prices have moved up by almost US$45/ton on a CFR Japan basis. The recent strength of the naphtha market has also found reflection in the downstream chain. Even though spot propylene prices have not responded much to this development due to comfortable supplies, spot ethylene prices have rebounded over the same period in both regions. Players in PP and PE markets also keep a close eye on the upstream chain. Many players across the board agree that the ongoing stable to firm trend in polyolefin markets is likely to remain in place as long as upstream costs remain high. Limited supplies and reduced operating rates are cited as another factor giving an upper hand to sellers. On the other hand, demand is not said to be particularly satisfactory in global markets.
In Asia, resistance is building on the buyers’ side as buyers argue that demand is not strong enough to support any further hikes. However, firm energy costs along with reduced supply are expected to hold the market firm at current levels in China. Southeast Asian players have already started to approach the import market with rollover requests for July. A Saudi PP producer, who announced a rollover to Southeast Asia but has not yet announced new prices to China said, “Chinese buyers are sticking to the sidelines. For the coming month, we expect that prices will remain stable as sluggish demand will hinder any increase attempts while strong upstream costs will encourage sellers to keep their prices firm.” In the Middle East, players anticipate that the PP market will retain its current firm levels into July. Many expect either rollovers or slightly firmer levels. A trader in Saudi Arabia reported, “We believe that PP and PE prices have already reached their peak levels. In July, we mostly anticipate steady levels instead of further hikes.” Turkish PP and PE buyers also acknowledge that no reversal in the recent firming trend is likely unless upstream markets see some relief. Indeed, some hike intentions are already voiced for July for several origins. “We are currently working at reduced capacity and we do not think that demand will rebound before September given the Eid holiday, summer vocations and elections in August. On the other hand, we are also aware that high energy costs will render any softening impossible,” commented a fibre converter.
According to ChemOrbis, hike intentions have also already started to be voiced for July in Europe. Firmer energy costs combined with supply limitations are lending support to sellers in their quest for higher prices for both PP and PE next month. A packaging producer in Italy said, “The outlook is firmer for the upcoming month as crude oil, naphtha and ethylene costs have all gained ground. We think that producers may issue increases from €10/ton to €30/ton, but we heard that a West European supplier is aiming for even larger hikes.”