Propylene supply in NW Europe sparse as many producers retreat from spot market

Propylene supply in Northwest Europe turned scarce as many producers retreated from the spot market while they assess their options in a weakening market, as per Platts. Producers found offers too low and prefer to stockpile for the time being and focus on contract obligations rather than sell. Several traders have had difficulty securing supply for export, which they continued to explore as an alternative route amid demand slump in Europe. However, there is not a lot of product on offer anymore, and the big volumes have disappeared. “Distressed" products seem to have been siphoned out of Europe following the series of exports to Asia and the US over the past month or two, as players attempt to manage their inventory. Asian propylene prices fell by US$98/mt week on week, at the end of last week to US$1320/mt CFR China due to poor demand. At freight cost of around US$300-350/mt, European traders estimated they had secured supply at around US$1000/mt FOB for exports to make sense. Several producers talked up price indications last week, at ranges heard at around Eur850-900/mt FD NWE for polymer grade. No deals were heard done last week as European buyers remained scarce. Other sources opine that producers were likely looking at further reduction in cracker run rates and would prefer to keep their stock while they assess their options. Overall, producers agreed that the market remained well supplied, while demand was lackluster, particularly ahead of the November contract price settlement, expected this week. Oversupply in the propylene market had persisted despite cracker run rates being so far reduced to 70-80%. This, combined with a lack of buying interest, had weighed on spot prices. For polymer grade, spot values have plunged to Eur795-800/mt FD NWE Friday, the lowest since January 2010, Platts data showed. According to the latest data published by the Association of Petrochemical Producers in Europe, propylene production in Western Europe reached 3.737 mln mt in Q3, slightly up from 3.699 mln in Q2, but down from 3.843 mln a year earlier. For ethylene, production was 5.091 mln mt in Q3, up from 4.992 mln in Q2 and down from 5.161 mln a year ago. Producers normally slow down during the seasonally weak summer June-July months and then ramp up again by August-September when buying traditionally resumes. This year however, producers kept on scaling back output even after the summer holidays as buyers' confidence was shattered by the severe volatility in the global financial and commodity markets.