The Asian propylene-naphtha spread has fallen by 17.8%, day on day to a six-year low of US$178/mt at the end of last week; amid excess supply, sliding oil prices and weaker demand in the region hit the propylene market, as per Platts. The spread was last lower on February 2, 2009, when it was calculated at US$165.50/mt, according to Platts data.
Asian propylene prices began to slide in August, following a propylene pipeline explosion in Taiwan, which resulted in the shutdown of propylene derivatives plants there. This in turn pushed Taiwanese propylene producers to export their product, leading to excess supply in the region. Additionally, tumbling global crude oil prices dragged propylene prices lower.
On Friday in the Asian propylene market, a spot cargo was reported to have traded at US$750/mt CFR China, down from the mid-US$800s/mt CFR earlier last week, according to industry sources.
Propylene demand in China was also taking a beating, as the slide in propane prices would have likely boosted operations at propane dehydrogenation units. Last Friday, the CFR China propane price was assessed at US$466/mt, falling US$250/mt from November 1, while the CFR Japan naphtha price was at US$512/mt, down US$206.63/mt over the same period.
Amid falling propylene prices and heavy supplies, some olefins producers have decided to reduce run rates at their steam crackers.
Taiwan's Formosa Petrochemical has decided to reduce its steam cracker operations from 100% to 90% from January. The company has three naphtha-fed steam crackers in Mailiao, with a total production capacity of 2.93 mln tpa of ethylene and 1.465 mln tpa of propylene.
Trading sources expect the Asian propylene market to remain bearish, as a positive ethylene margin would ensure that rate cuts at steam crackers would be limited.
16-Dec-14 
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