Supply concerns drive spot propylene prices higher across the globe

Spot propylene prices have been moving higher across the globe due to tight supply conditions resulting from scheduled turnarounds at a number of crackers in Europe and Asia as well as unplanned outages resulting from the March 11 earthquake in Japan, as per Chemoris. Market sources commented that the ongoing political turmoil in the Middle East has also played a role in keeping global propylene prices firm as concerns over the ramifications of the geopolitical instability racking the region have helped push crude oil and naphtha prices to some of the highest levels seen over the past three years. Crude oil futures on the Nymex settled at US$107.94/barrel on Friday while spot naphtha prices are hovering just above the US$1000/ton threshold in Europe and just below the same key threshold in Asia. In Asia, spot propylene prices held firm over the past week, gaining $5/ton on an FOB Korea basis in spite of slower than expected demand from the Chinese market. When compared with the beginning of March, spot propylene prices have gained nearly $70/ton on a month over month basis. Korean exporters reported that availability within the country is limited due to a heavy cracker maintenance season in the country while demand for Korean propylene remains strong given the lack of export offers from Japan following the massive earthquake which struck the country on March 11. In Europe, spot polymer grade propylene prices are currently being quoted at prices €5/ton higher than the previous week’s done deal levels and €20-25/ton higher than the recently settled propylene contract for April, which represented a €25/ton increase from the March settlement. Stronger spot prices as well as the premium spot cargoes currently enjoy over the settled contract price were attributed to tight supply within the region as well as higher upstream costs. A buyer claimed that they have been having trouble locating propylene cargoes in the spot market despite actively searching the market for material. However, traders commented that most buyers are still feeling sufficiently well covered to evaluate multiple offers in the spot market and that they had therefore not been seeing any urgent requests for material. Sources speculated that many buyers are currently waiting for the second half of April, when supplies are set to loosen along with the scheduled restart of several crackers in the region. In the US, spot quotes for polymer grade propylene were reported nominally higher by around US$90-100/ton last week in line with a surge in spot prices for refinery grade propylene. The recent upswing in spot prices has provided some support to producers in their push for a US$220/ton increase on the April propylene contract. Before the recent jump in spot prices, players had been predicting that April contracts would settle with slightly smaller increases of around US$132-176/ton, but some PP sellers are now reported to be fashioning their new offers around expectations that propylene producers will succeed in implementing the full extent of their price hike targets for April. Players pointed to limited availability and reduced inventory levels as the main factors pushing prices higher.