Supply concerns drive PP prices higher across Asia

03-Aug-11
Asian PP markets have been tracking an upward trend for the last few weeks on the strength of stronger upstream costs and tight supplies as a result of plant shutdowns at several producers as per ChemOrbis. Following the news of a new fire outbreak in Formosa’s Mailiao complex, spot propylene prices rose this week by US$90/ton FOB South Korea, with US$65/ton of this increase being recorded from Monday to Tuesday. CFR Japan spot naphtha prices also moved up this week, posting a US$15/ton increase from Friday to Monday. PP sellers received further incentive to take a firmer stance this week upon hearing news that two major overseas producers- Formosa and Petro Rabigh have suspended their August import business to China following current or previous shutdowns. Inside China, several PP producers including Sinopec Sabic Tianjin Petrochemical, Dushanzi Petrochemical and Yanshan Petrochemical had earlier shut their plants either for maintenance or on feedstock shortage. China’s PP market has responded to these bullish factors due to upward pressure from costs as theoretical cost calculations based on spot propylene prices suggest that import sellers to China currently need to achieve prices around US$90/ton above this week’s highest PP price to cover their costs. Over the past week, spot PP prices rose by US$20-30/ton. Traders have responded to rising PP prices in Asian markets by stepping up their purchases, although most buyers are said to be avoiding making purchases. Traders agree that the market outlook is firm for the short term. “Prices will continue to firm up in spite of slow demand given the tight supply situation,” a trader commented. The Southeast Asian PP market, where regional producers have revealed August prices with monthly increases of at least US$50/ton since last week, has risen faster than China. Import PP prices in Southeast Asia jumped by US$90/ton on the high end week over week.
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