Losses in crude oil, bearish buyer’s sentiments amid plunging PP production costs have triggered a downward trend in Asian PP markets since the first half of May, as per Chemorbis. According to ChemOrbis Price Indexes, import homo-PP prices came down by US$130-185/ton in China and by US$140-150/ton in Southeast Asia since H1-May.
Recently, upstream prices have seen a marginal rebound, as spot propylene prices in Asia rose by US$15/ton and naphtha by US$11/ton from the beginning of June. Fluctuating since the start of the month, crude oil prices also gained US$2.54/barrel within the same period to linger around US$75.
Although feedstock prices regained some of last month’s large losses in Asia, the slight rebound in the upstream chain is yet to affect the PP market as the break even levels for PP production costs based on spot propylene are still below the regional producers’ homo-PP offers. PP players in China and Southeast Asia expect the current downward pressure to persist for a while more as poor demand and the upcoming new capacities seem set to exert renewed downward pressure on homo-PP prices in the region.
Additional availability from several new capacities in Asia, India and the Middle East may become a factor, leading to further weakening in the PP sentiment. Additional supply expected from Asia includes China’s Sinopec Tianjin Co., which already launched commercial production in May from their 450,000 tpa PP plant and Sinopec Zhenhai Refining & Chemical Company, which saw on-spec production at its new 1 mln tpa cracker on June 12, which supports a new 300,000 tpa PP plant in China. In addition, HMC Polymers will start up its 300,000 tpar PP plant in Thailand in July, while Siam Cement Group (Thai Polypropylene Co-TPP) raised the operating rates at their new PP plant with 400,000 tpa capacity to 90% in June. PetroVietnam, which is preparing to start up its 150,000 tpa PP plant in Vietnam, is also scheduled to be on the scene soon, as the company is expected to start trial runs in July. Supplies during this time period also include India’s IOC, which is expected to raise the operating rates of its new 600,000 tpa PP plant to 80% around mid-June and Borouge, which is expected to start up its new PP plant with 800,000 tpa capacity officially in June/July, while the company is scheduled to start commercial operations in August or September. The effects of all these new capacities are taking their toll on Asian PP markets, dampening buying interest, which was already limited over the past week as most buyers continued to wait on the sidelines in anticipation of further price reductions in the days ahead.