Higher Q1 Prices Blamed For Reduced Mideast PP Supplies To Europe

Higher Q1 prices blamed for reduced Mideast PP supplies to Europe

16-May-17

Brazilian producer Braskem has cited a lack of Middle Eastern polypropylene imports into Europe for higher prices in Q1-2017, as per Platts.
"The high number of maintenance shutdowns at PP plants in the Middle East during Q1 2017, which affected 15% of the region's total polymer production capacity, led to lower exports to Europe in the period and consequently higher prices in the region," Braskem said in its first-quarter results statement.
In the Middle East, PP supplies from Borouge took a hit after a fire at the Takreer refinery in the UAE in January. Takreer supplies feedstock propylene to Borouge's 900,000 mt/year PP plant. Braskem also said that European PP fundamentals were also strengthened as demand increased on a year-on-year and quarter-on-quarter basis. The demand increase was driven primarily by the automotive, consumer goods and construction material industries. In addition, Braskem said PP demand increases were due to "higher prices for polystyrene and engineering plastics, which led consumers to seek out other products [, i.e. polypropylene,] to substitute these resins."

According to S&P Global Platts data, homo injection polypropylene spot prices for delivery in Northwest Europe averaged Eur1,169/mt ($1,284/mt) in the quarter, an increase of 14% year on year and up 16% from Q4 2016.
Looking upstream, European PP prices in the first quarter were supported by the higher cost of propylene. "The average price reference for propylene in Europe in Q1 2017 was US$870/mt (Eur792/mt), 36% higher than in Q1 2016, which is explained by the scheduled and unscheduled shutdowns at both crackers and propylene production units using propane as feedstock and by the strong demand for propylene derivatives in the region in the period."

Braskem operates two industrial units in Europe, both producing polypropylene. The combined polypropylene capacity of the units, at Wesseling and Schkopau in Germany, total 545,000 m tpa. Supply from Borouge is expected to improve in the third quarter, when the company's PP plant will receive additional propylene from Takreer's newly constructed 500,000 m tpa PDH plant. "Propylene supply will come from the new PDH unit in the third quarter," Mark Garrett, CEO of Borealis -- which holds a 50% stake in the project -- said earlier this month, adding that the company will be able to run its Borouge-3 PP unit at three-quarters of capacity after the PDH unit has been started.