At the onset of June, continued weakness in energy markets along with unsupportive buying interest pushed spot propylene costs down in major global markets such as Europe and Asia, as per ChemOrbis, gaining modestly in the US. The energy complex has witnessed steady decreases since the start of the month, weighing down on downstream olefins and polyolefins markets across the globe. Nymex crude oil futures have declined by over US$15/barrel while ICE Brent crude oil prices have lost over US$12/barrel since May 1. Lower energy prices pushed naphtha costs downward in both Europe and Asia. Spot naphtha prices plunged around US$155/ton in Europe on FD NWE basis and US$115/ton in Asia on CFR Japan basis since the start of the month.
In Europe, spot propylene values moved down by €40/ton on FD NWE basis during last week, bringing the total decrease since the beginning of May to €190/ton, as per ChemOrbis. Prior to the June contract settlements on Friday, lower spot prices continued to keep buyers on the sidelines in anticipation of a new round of price decreases amidst their sufficient stocks heading into the new month. June propylene contracts settled down €125/ton at €1105/ton with the same terms. The June outlook calls for further declines amidst muted buying interest from the downstream PP market, where buyers are avoiding rebuilding stocks given the economic woes in the region. In response to weak market dynamics, several cracker operators are said to have reduced their operating rates. In Asia, some South Korean and Taiwanese producers also started to reduce their propylene output amid unsupportive demand and low margins. Spot propylene offers softened by US$20/ton on an FOB South Korea basis week over week. Including the decreases seen last week, spot propylene prices have nosedived by around US$210/ton since the beginning of the month. Moving into the new month, market players are drawing a bearish picture, pointing to the lack of improvement in demand from downstream markets.
Defying bearish developments in upstream markets and other global markets, spot polymer grade propylene prices showed some slight increases in the US market over the week. Spot prices gained 1.25 cents/lb (US$28/ton) on DLVD USG basis when compared to the previous week. Following the significant price declines during the month, the modest pick-up in late May spot prices can be attributed to the unexpected shutdown at Westlake Chemical’s two crackers in Louisiana. Citing some compressor issues, the company will reportedly keep the two crackers, which have a combined capacity of 544,000 tpa, offline for two weeks during repair works. Despite the increase seen over the past week, spot polymer grade propylene values have still posted a large decrease of 9 cents/lb (US$198/ton) with respect to the levels reported in early May.