Propylene prices in Asia net weekly losses of US$122/mt

26-May-10

Propylene prices have fallen in Asia, plunging by US$122/mt in the week, as per Platts. Prices have fallen to US$1140/mt FOB Korea for 1,500 mt cargoes to be loaded in the next 20-40 days. The steep decrease follows a US$75/mt plunge in polypropylene values in the same week to US$1285/mt CFR China. The lackluster sentiments and pessimistic outlook for both sectors have been caused by sharply lower oil prices, amid concerns of Europe's sovereign debt crisis, its contagion, especially to the US banking system, that has raised concerns of a repeat of the global recession of 2008-2009. These worries brought demand for PP and propylene to a standstill. Uncertain global consumer confidence is expected to erode factory orders for finished goods made in Asia, leading to a lull in demand, prompting destocking amongst buyers. The plunge in propylene price was also a technical correction complementing deteriorating PP prices. As PP is the largest derivative sector for propylene, a prolonged squeeze on PP margins has the potential to spark a fresh round of production cuts, and monomer cargo-holders knew they had to slash prices to prevent propylene stocks from building too quickly.