Continued Downward Pressure on Propylene

Propylene supply in Northwest Europe turned scarce as many producers retreated from the spot market while they assess their options in a weakening market, industry sources said.

Producers found offers too low and would rather store their product for the time being and focus on contract obligations rather than sell, they added. Several traders said they had difficulty securing supply for export, which they continued to explore as an alternative route given the demand slump in Europe.

"There's not a lot of product on offer anymore. The big volumes have disappeared," a trader said. Another trader agreed, saying he was turned down by several suppliers he approached over the past few days for November material.

OUT OF EUROPE A producer said a trader who approached him was only willing to pay Eur725/mt ($1,005/mt) FOB. "I have no interest to sell at these prices," he said.

Another producer said the "distressed" products had been siphoned out of Europe following the series of exports to Asia and the US over the past month or two.

"Everyone is just trying to manage their inventory," he said. Asian propylene prices fell $98/mt Friday week-on-week to $1,320/mt CFR China due to poor demand. At freight cost of around $300-350/mt, European traders estimated they had secured supply at around $1,000/mt FOB for exports to make sense. Several producers talked up price indications last week, at ranges heard at around Eur850-900/mt FD NWE for polymer grade. No deals were heard done last week as European buyers remained scarce.

RUN RATE CUT

Other sources felt that producers were likely looking at further reduction in cracker run rates and would prefer to keep their stock while they assess their options.

Overall, producers agreed that the market remained well supplied, while demand was lackluster, particularly ahead of the November contract price settlement, expected this week. Oversupply in the propylene market had persisted despite cracker run rates being so far reduced to 70-80%. This, combined with a lack of buying interest, had weighed on spot prices.

For polymer grade, spot values have plunged to Eur795-800/mt FD NWE Friday, the lowest since January 2010, Platts data showed.

According to the latest data published by the Association of Petrochemical Producers in Europe, propylene production in Western Europe reached 3.737 million mt in the third quarter, slightly up from 3.699 million in Q2, but down from 3.843 million a year earlier. For ethylene, production was 5.091 million mt in Q3, up from 4.992 million in Q2 and down from 5.161 million a year ago.

Producers normally slow down during the seasonally weak summer June-July months and then ramp up again by August-September when buying traditionally resumes.