High costs and weak demand bring Asian propylene derivative markets to a standstill

Trading in the downstream propylene derivatives markets in Asia have come to a standstill amid weak demand and high feedstock propylene prices, as per Platts. Asian propylene prices were at a 29-week high Tuesday at US$1505/mt FOB Korea. With the shutdown of Taiwan's CPC Corp.'s No. 5 naphtha-fed steam cracker last Friday, following a fire at its refinery and petrochemical complex in Tashe, Kaohsiung, industry sources expect propylene prices to continue rising. Downstream propylene derivatives producers were trying to pass on the higher feedstock costs to end-users, but were facing increasing difficulty as demand remained weak. Polypropylene -the largest downstream derivatives market, has been facing weak demand since the Lunar New Year holidays in H2-January. But PP producers and traders are reluctant to lower prices further to attract buying interest following the recent hike in feedstock propylene costs. This has led to thin trading in the downstream market, with offers staying low at around US$1470-1500/mt CFR China and little buying interest. With PP offer prices of US$1470/mt CFR China and propylene costs hitting US$1505/mt, PP producers are suffering a negative margin of minus US$185/mt. Non-integrated PP producers typically need to price their product $150/mt above feedstock propylene prices to break even. Another propylene derivative, acrylonitrile, hit a 35-week high on March 27 at US$2390/mt CFR Far East Asia but there has been no discussions since then with the bid-offer gap seen widening.
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