Asian propylene market pulled lower

11-Aug-11

In Asia, propylene costs started to react to the dramatic decreases in oil prices, which plunged below the US$80/bbl threshold early this week, as per ChemOrbis. The biggest reaction was seen yesterday, as spot propylene shed a hefty US$80/ton on FOB Korea basis. Spot propylene prices had started the month of August with increases of US$220/ton when compared to July. In the first week of August, propylene prices had maintained their firm stance just to start this week with US$20/ton decreases from last Friday. The glum economic outlook continues to shadow the oil market while China’s crude oil imports dropped to their lowest level in 9 months in July due to maintenance shutdowns at several of the country’s refineries, which reduced demand. On top of this, China’s crude oil imports may drop further in the upcoming months as seven major refineries with a combined capacity of 707,800 bpd are scheduled to be shut in the third quarter, according to oil analysts. These bearish upstream developments are already felt in the Asian PP markets and in China, domestic producers, who mostly maintained their prices at the beginning of the week, issued CNY200-400/ton (US$31-62/ton) decreases yesterday in a bid to generate better demand since buyers have stepped on the sidelines, preferring to wait and watch. Prior to the domestic producers, distributors and traders had already started to cut their prices to encourage buying interest with import homo-PP prices decreasing US$20-50/ton on a week over week basis.