Asian propylene market hit multi year high levels on supply issues

The Asian propylene market has been steadily firming up since early July and in spite of some bumps along the road, the market has hit the multi-year high levels this week. 

Propylene cost based on FOB Korea term surged $50/ton compared to the beginning of September to $1135/ton while CFR China value increased $45/ton in the same period to $1185/ton as on 25 September 2018. 

One of the reasons that support the continuous increases is the tightening supply condition amid heavy maintenance shutdown season. Six major crackers in Fareast Asia are shutting down between September and November for routine maintenance work. “Supply from South Korea is particularly tight,” a market source said.

Strengthen upstream propylene costs are expected to generate some support for the downstream PP market, which has been traded well below the theoretical costs in recent days. At the time this report is published, the average import homo-PP yarn to China stands at $1240/ton, about $90/ton lower than the theoretical costs at the current propylene prices. 

“We think import homo-PP might hold firm in the near term thanks to aggressive pre-holiday replenishment activities in China in recent days. Most producers have already depleted a good quantity at this time and would be free from any sales pressure,” a Chinese buyer commented.