European propylene market under downward pressure on lower-than-expected demand

25-Jul-11
The European propylene market is coming under intense downward pressure from lower-than-expected demand, as per ICIS. This is caused by technical problems at certain derivatives exacerbating an already weak situation on key derivative polypropylene (PP). Reduced consumption has led to build up of propylene supplies, and some producers and even some consumers are urgently looking to offload volumes. This is despite some cracker reductions that had been implemented in June and ramped up in some areas in July, to re-balance the ethylene market. As a result, spot prices have been falling and latest indications suggest that even €850–900/ton (US$1214–1285/ton) CIF NWE for polymer-grade is finding no buying interest. Chemical-grade prices are being heard at around €800/ton on the inland market, while on the coastal market prices could be below €700/ton and near the propane value to make an export workable. Some volume had recently been booked for export to Mexico, sources said, and while there appeared to be opportunities to sell cargo into the Asian market, this was only workable if cargo sizes were large enough to be freight-advantaged. The outlook for August seems to be getting worse. Expectations of a decrease usually mean that buyers postpone any requirements into the next month to take advantage of the lower price. While there was much feeling that the contract number should go down, squeezed cracker margins, because of firmer naphtha feedstock prices, will make producers reluctant to do this. The key reason for the lengthening market is viewed as failure of European derivatives to keep up with its more competitive Asian counterparts.
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