Propylene costs surge in Asia and Europe, pulling PP markets up

Propylene costs demonstrate a firm trend in Asia and Europe as offer levels indicate significant increases when compared to the end of 2010, as per Chemorbis. Some shutdowns in both regions continue to give support to this rising trend. In Asia, spot propylene prices gained US$90/ton increases on FOB Korea basis when compared to the beginning of the month given tight supplies and good demand in the region. YNCC’s No. 2 cracker with 270,000 tpa propylene capacity at Yeosu was hit by a fire towards the end of the previous week although the company managed to restart the cracker shortly after the outage. However, YNCC is currently running the cracker at lower operating rates at 80% capacity. Meanwhile, Guangzhou Petrochemical will shut its 220,000 tpa cracker on February 14 for a 30-40 days long maintenance shutdown. Formosa’s 270,000 tpa propylene plant, located in Taiwan, is also to halt operations during January-February for a month long turnaround on the metathesis unit. Looking at the regions’ PP market, import PP prices firmed up in China on the back of the higher propylene prices as well as the limited material availability in the region. Most overseas producers elected to issue additional increases on their import offers with respect to the previous week for their February cargoes. Sellers appear adamant to maintain their current firm offer levels ahead of the Chinese New Year holiday. In Southeast Asia, a similar panorama shows up in the PP market as stronger upstream costs coupled with restricted supply levels caused sellers to issue further increases on their PP prices. January demand is reportedly performing better compared to December, according to players in the region. Some buyers also confirm this information by saying that they plan to make fresh purchases in anticipation of firmer offer levels to emerge following the Chinese New Year holiday. In Europe, spot propylene offers gained €50/ton increases when compared to the start of the month on FD NWE basis. Meanwhile, January propylene contracts also moved up significantly by €110/ton. Looking at the upstream market, Sabic Europe’s 1.25 million tpa cracker in Netherlands was running at lower operating rates as of January 5 following an unexpected mechanical issue. Borealis, meanwhile, is to perform a maintenance shutdown for 5 to 6 weeks at their 450,000 tpa propylene plant in Belgium, starting from mid-January. Polimeri Europa’s cracker in Italy is also mulled over to be shut for a turnaround for 6 weeks during February and March. These bullish factors are taking their toll on Italy’s PP market as the spot market deals see €100-130/ton increases for January while the gentlemen’s agreements see €120-140/ton increases for the month. Existing demand coupled with the limited supplies and the higher propylene costs already led to higher February PP offers in the country. Some buyers already started to receive €50/ton higher PP offers for the next month, so far.