Despite large drops seen in crude oil prices since the start of the month, PP prices in China dropped at a relatively slow pace, losing US$20-30/ton in the second week of the month, US$20-50/ton decreases in the third week and finally larger decreases in recent days, as per Chemorbis. In Southeast Asia, however, sellers attempted to hold on to prices for much of this month with only a few decreases reported until this week. In Turkey, however, PP prices had actually seen increases while crude was moving down for much of this month.
This scenario has changed this week, with PP producers in China and Southeast Asia responding to the large decreases seen in feedstock costs with considerable price cuts this week, followed by traders in the Turkish PP market as the cost of production has changed suddenly due to the recent fall in Asian propylene prices.
Last week, crude oil prices maintained their downtrend to fall as low as US$68.01/barrel from the early May settlement of US$86.19/barrel, before rebounding slightly above US$70/barrel. The downward movement in oil prices was followed by the Asian naphtha market, where prices lost ground by US$142/ton since the beginning of May before gaining around US$7/ton back this week. Under pressure from the energy markets, spot propylene prices in Asia also plunged by US$200/ton since the start of May, with US$165/ton of the total decrease coming over the past one week. The drastic fall of spot propylene prices has pulled theoretical PP production costs down to match the low end of the overall spot PP range in China this week. Despite the earlier drops in feedstock prices, the theoretical production cost of PP had been standing above producers’ PP prices to China, which had kept the extent of decreases on PP prices somewhat limited until this week. However, following the recent slide in production costs, PP producers came with remarkable price cuts to China this week. In the country’s spot homo-PP market, a number of regional producers announced large decreases of US$70-140/ton on their initial June offers, while a Southeast Asian supplier achieved some sales US$140/ton below their May offer level. The downward trend has accelerated in Southeast Asia as well, with the import homo-PP market also witnessing price cuts of up to US$60/ton from regional producers this week. When compared with the previous decreases of US$10-20/ton seen on other origins a week earlier, the rapid change in sellers’ pricing strategies becomes more visible. In Turkey’s PP market, the import PP prices had been completely unresponsive to the global downward pressure despite the country’s ongoing premium on non-European origins, these origins were reported with decreases of up to US$90/ton this week. As regular PP producers are yet to announce their June prices to the country, players expect to see further decreases since the current done deal level in China indicates that current levels in Turkey continue carrying a large premium over other global markets.