Propylene spot prices in Europe need to rise further if the gaps in supply are to be filled, as per ICIS. Traders said that the market would begin to get some relief and return to some balance when spot prices rise to levels that would open the arbitrage and attract deep-sea volumes away from the US market.
Spot propylene prices were currently being pegged in the low to mid €1000s/ton. Prices need to move above €1,100/tonne (US$1466/ton) CIF (cost insurance freight) NWE, considering US prices that are currently around US$1700/ton [delivered]. Propylene supply in Europe had been extremely tight since the start of the year because of cracker and refinery rate reductions, unplanned production problems and the strikes at French refineries last month. Derivative demand was strong supported primarily by the export market, particularly to Asia. The potential to work Southeast Asian volumes into Europe is currently being assessed. There is still demand to cover shorts, and a hike in prices will just be a matter of time. Some predict that the arbitrage would be workable by May.
However, consumers said that they were not in a position to pay such prices. While derivative demand has been better than expected, they are under constant pressure to recover the contract price increases imposed all year and continue to remain competitive on the global market. Producers hit by unplanned production hiccups were the only obvious buyers. The tight supply and demand situation was highlighted by the recent €70/ton increase in the April contract settlement, which at €980/ton FD (free delivered) NWE, was, for the first time, higher than ethylene that settled twenty dollars higher at €960/ton.
30-Mar-10 
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