Spot propylene gains ground in Europe and USA, retreats in Asia

Spot propylene prices moved higher over the past week in Europe and the US based on availability concerns as well as better than expected demand from the European market. Meanwhile, spot propylene prices moved down in Asia as weaker derivative demand combined with declining upstream costs sent Asian buyers to the sidelines, as per Chemorbis. In Europe, spot propylene prices rose €10/ton over the past week on concerns that supply may tighten in the days ahead along with better than expected downstream demand. Although November and December are generally relatively slow months in the spot propylene market, one propylene producer commented that they have had to revise their outlook on the spot market for December as they continue to see steady spot demand in spite of the season. Some sellers stated that they have even begun to limit their spot allocations as they feel that the market could become quite tight in December should there be any unexpected plant outages. Although supply is still said to be generally sufficient in Europe, cracker operators have reduced their operating rates to around 85% of capacity in response to mounting naphtha costs, leaving the market more vulnerable to supply disruptions. Concerns over the possibility of further supply tightness were heightened towards the end of last week when PropanChem declared a force majeure at its 350,000 tpa propane dehydrogenation unit in Spain. Supply concerns also pushed spot propylene prices higher in the US over the past week. Petrologistics declared a force majeure on the output of its new 544,000 tpa propylene plant in Texas after the plant was shut down earlier this month due to technical problems. In addition, ChevronPhillips announced plans to conduct a two week maintenance shutdown at the end of this month at its 417,000 tpa propylene capacity cracker in Texas. Spot prices for polymer grade propylene rose US$22/ton over the past week as a result of these supply issues, although players commented that there was not much activity in the spot market over the past week. While spot propylene prices have moved higher in Europe and the US, Asian markets witnessed lower spot propylene prices over the past week as lower upstream costs along with news that the Chinese government is planning to enact further measures to restrain inflation within the country resulted in weaker buying interest. Spot propylene prices on an FOB Korea basis lost US$50/ton over the past week due to the drop-off in spot demand. Some players expressed concern that the spot market may face some oversupply issues in the days ahead as Japan’s proyplene production has been picking up recently even as propylene demand within the country has fallen off.