Spot propylene costs have been heading south for some time in all three major markets including Asia, Europe and the US, as per ChemOrbis. Lower upstream costs such as crude oil and naphtha coupled with thin demand have taken their toll on the spot propylene markets around the globe.
In Asia, spot propylene prices were US$120/ton lower on FOB Korea basis with respect to the start of September. Overall monomer buying interest is not encouraging due to the weak downstream demand. PP producers have been complaining about the poor demand and their still high production costs despite the most recent decreases in the propylene prices. The most up to date import PP prices in China, reported prior to the National Day holiday, stand US$10-110/ton below the theoretical PP production costs based on the current propylene prices after adding US$20/ton freight to the originating country and US$150/ton conversion cost. Therefore, many PP producers are planning to cut their production rates, which might pull propylene prices further down. Amongst weak demand, lower upstream costs also affected these drops as crude oil prices on Nymex are currently below the US$80/bbl threshold - US$9.73/bbl down from the early September levels. Meanwhile, naphtha costs retreated US$75/ton on CFR Japan basis when compared with the beginning of the month.
In Europe, offer levels for spot propylene retreated by €50-55/ton (US$68-74/ton) on FD NWE basis since the beginning of September while the October propylene contract settled with €10/ton (US$14/ton) decreases when compared to the September agreement . The new contract price indicates the lowest figure that has been recorded so far this year. Players in the region mostly refer to the slow propylene demand and the lower naphtha prices that fell by US$105/ton on CIF NWE basis since early September, for the lower settled contract price despite the sellers’ initial rollover aims to recover their poor margins before they eventually conceded to the decrease. On the other hand, buyers were targeting to achieve larger decrease amounts given the comfortable availability and weak demand in the downstream PP market. For now, the contact price carries a premium of around €210-220/ton over spot prices in the region.
Looking at the US market, propylene prices appear to follow the pattern seen in the other two main regions. Prices shed 6 cent/lb (US$132/ton) on FOB USG basis since the beginning of September while 5 cents/lb (US$110/ton) of this cumulative decrease amount materialized over the past week. Overall weak demand, triggered by the concerns regarding the global economy, and volatile energy prices were highlighted as the main reason behind these declines. Now, players comment that the lower spot prices might exert a downward pressure on the contract prices, which have been following a steady trend for the past couple of months and currently stand 8 cents/lb (US$176/ton) above the prevailing spot prices. Maintenance shutdowns in the country so far have failed to improve prices since the thin buying interest overpowered the availability limitations.