PP tightens this week in China on reduced import availability, resurgent buying

Polypropylene (PP) seems to have become very tight in China over the past week as a result of reduced imports from North America and resurgent buying, as per ICIS. PP supply from North America is no longer available for delivery to China because of a sharp decline in avails as a result of rising propylene costs in North America. Also, supplies from the Middle East don't seem to be able to fill the gap for now. C3s have risen by 53% since November 2009 as contract pricing for April settled 7 cents/lb higher (US$154/ton), driven by reduced refinery operating rates on the dismal state of the refining industry globally. Due to tumbling US natural gas prices relative to crude, a response to the big rise in local gas supply; US Gulf Coast crackers are running on 82% ethane and only 18% naphtha compared with 65% ethane and 35% naphtha a year ago. PP producers have become more heavily dependent on feedstock supply from FCCs over the last 12 months due to crackers switching to lighter feedstocks. Also, this week has seen the return to markets of buyers who were on the sidelines. A large number of biaxially oriented (BOPP) film producers had not been buying for several months. These buyers have returned to the markets, exerting pressures on demand as most of them are mega sized with large buying requirements. The affordable levels of yarn and BOPP film-grade prices that have been falling over the past few weeks along with a rise in oil prices has prompted the buying frenzy.
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