Spot propylene prices facing downward pressure across the globe

05-Jul-11

Globally, spot propylene prices are facing downward pressure over the past week as sluggish demand and lower July contract settlements largely negated the effects of the recent up-tick in energy costs, as per ChemOrbis. Crude oil and naphtha prices have regained marginally, over the past week after sinking to their lowest levels in the past few months. In Europe, spot propylene prices declined by around €90/ton over the past week after the July propylene contract settled with a decrease of €75/ton from June, bringing spot propylene prices to their lowest level since January 2011. In addition to the decline in the July contract, players also cited poor demand and sufficient supplies as factors weighing down on spot prices. Spot propylene demand was said to be poor last week and players are generally taking a bearish view of the July outlook in the downstream PP market. European propylene sellers stated that they are expecting demand to remain sluggish throughout the summer before demand starts to pick up again in the fourth quarter. Trading activity was said to be limited in the European spot market as most buyers have retreated to the sidelines in anticipation of further price declines in the days ahead. In the US, players are still waiting for settlement of the July propylene contract. A producer reportedly nominated July contract price with a decrease of US$44/ton from June, although buyers expect to see larger decreases of around US$66-110/ton. Nominal spot polymer grade propylene prices were reported to be mostly stable, with the recent up-tick in energy costs having failed to excite much buying interest in anticipation of a decrease in the July propylene contract. Spot propylene prices also moved lower in Asia over the past week, with spot prices on FOB Korea basis losing around US$20/ton to their lowest levels since February, as poor demand kept prices lower even after the recent rises in upstream costs. Downstream PP demand is reported to be limited these days, with many PP producers complaining that they are unable to cover their theoretical production costs given the prevailing spot propylene prices. Most players do not expect to see much improvement in demand for July, but some optimism prevails about the demand outlook for August.