Propylene Price - Will propylene costs stabilize in Asia

Will propylene costs stabilize in Asia?

31-May-10

After stability in the first two weeks of May, spot propylene costs in Asia have been nose-diving since H2-May. As per Chemorbis, ongoing concerns regarding the global economy and persistently weakening crude oil prices hit PP demand in the region, resulting in producers sourcing feedstock on need-basis in order to avoid building up stocks – adding to the decreases in Asian propylene prices. Since the beginning of May, spot propylene prices US$270/ton on FOB Korea, with prices retreating by $240/ton in H2-May. Spot propylene in Asia stands at US$1020/ton FOB Korea, while buyers ponder whether rebounding crude oil prices will halt the decreasing trend. Crude oil prices lost nearly US$16/barrel since the beginning of the month, but started to rebound since the middle of last week; gaining US$5.80/bbl within two days to reach $74.55 on May 27. This recovery some hope of revival to propylene sellers amid propylene shutdowns in the region. Nippon Oil shut two 60,000 tpa propylene plants in Japan during May and June to implement maintenance on the FCC units for 30 and 39 days respectively. Nippon Oil’s other propylene plant with capacity to produce 100,000 tpa will be shut for a month in June-July for its FCC unit maintenance. Mitsubishi is planning to shut its propylene plants with 170,000 tpa, 260,000 tpa and 150,000 tpa capacity during May and July. The shutdowns are to last for 6 weeks, 2 months and 1 month, respectively. S. Oil’s 200,000 tpa plant in South Korea will be down for 40 days, starting in June. SK Energy’s 250,000-350,000 tpa plant in South Korea will be shut for one and a half month. Mitsui’s propylene plants with 280,000 tpa and 140,000 tpa capacity in Japan will also be shut during June-July and June-August, respectively. Now, propylene sellers are hoping to see at least steady prices in the short term. If crude continues to move up, sellers might see support to stabilize their prices along with the plant shutdowns.