Spot propylene prices moved lower across the globe once again last week as lackluster propylene demand and sufficient supply levels weighed down on prices. Most players are not expecting to see any revival in global propylene markets over the next few weeks as many signals point to the possibility of further price declines in the weeks ahead.
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In the US, spot deals for polymer grade propylene came down by another 2 cents/lb ($44/ton) over the past week after October propylene contracts had settled with massive decreases of 14 cents/lb ($309/ton) from September in the previous week. Poor demand was cited as the primary reason behind the ongoing drop in spot propylene prices, which has brought US spot prices for refinery grade propylene to their lowest levels since August 2010. Spot prices for polymer grade propylene are currently trading with a significant discount of 10 cents/lb ($220/ton) when compared to the October contract settlement, leading some players to predict another large drop in the November contract price. Other sources say that they believe that spot propylene prices have reached the bottom of their current declining trend.
In Asia, spot propylene prices on an FOB Korea basis fell $30/ton over the past week, bringing the cumulative month over month decline in spot propylene costs to approximately $180/ton. Sources pointed to lengthening supply and slow demand as the main reasons for the drop in prices, with sellers admitting that they have been targeting a higher price level but have been unable to implement their price ideas owing to stiff resistance from buyers. Most cracker operators have not yet considered reducing their run rates while the impending restarts of several crackers within the region portends an ongoing lengthening in the supply chain. Taiwan’s Formosa is planning to restart its No. 3 cracker in Mailiao, which has a propylene capacity of 600,000 tons/year, next week. JX Nippon Oil & Energy is planning to restart an olefins conversion unit with a propylene capacity of 140,000 tons/year later this week.
In Europe, spot propylene prices decreased by around €50/ton on an FD NWE basis over the past week. Cracker operators in the region have reduced their operating rates to around 70-80% of capacity, but these rate reductions have not yet proven sufficient to offset the weakness in demand as many derivative producers have also reduced their rates in response to weak demand. Some derivate producers report that they asked for a 20% reduction in propylene deliveries from their supplies to cope with declining demand, adding that they do not expect to see any major improvement in the demand situation before December. Several European sellers have been attempting to divest themselves of excess cargoes through the export market, although traders reported that it is becoming increasingly difficult to conclude export deals as propylene demand is poor in both Asia and the US.
