Bullish trend persists in PP markets in Asia, Italy and Turkey23 Apr 2010 • by Natalie Aster
PP prices moved higher for another week in global markets including China, Southeast Asia, Turkey and Italy, while players in Egypt are currently awaiting new prices, which are expected to firm up for May, as per Chemorbis. Low supply levels, along with bullish spot propylene prices in Europe and Asia, which overshadowed the recent decreases seen in crude oil prices, were considered to be the factors supporting the firming trend in the PP markets. Additionally, supplies from the US remain out of the global market due to high prices of propylene and PP in USA, opening opportunities for other countries to supply to it’s neighbors to the south.
In Asia, the spot propylene market has been on a bullish trend, with prices rising by US$65/ton since the beginning of April. The largest weekly increase was posted over the past week due to the extended supply problems in Japan and strong export demand from Latin America. Combined with lower PP stocks on the sellers’ side, firmer propylene costs helped China’s PP market to move up further this week in defiance of the growing resistance from buyers as well as plunging crude oil prices. In China, import prices gained another US$50/ton on the low end over the week on top of the previous week’s increase of US$40/ton. Following the upward trend in China, the Southeast Asian PP market also saw higher prices after a US$30/ton increase on the low end of the overall import level in the previous week. In the import market, two global producers announced US$20-40/ton increases this week on their homo-PP offers to the region.
With the new costs, Asian PP producers are witnessing negative margins as current theoretical PP prices based on spot propylene costs that stand US$130-160/ton above the prevailing homo-PP prices in the region. Reports from China and Southeast Asia however, state that the latest round of price hikes has met with growing buyers resistance, with many converters adopting a wait and watch stand to see the effects of the upcoming new capacities from the Middle East, India and Southeast Asia next month.
A similar upward rally was also seen in the Mediterranean PP markets as a result of the bullish run in European spot propylene prices, which rose by €75-85/ton (around US$100-115/ton with the recent parity) since the beginning of April. Taking further support from the persistent tightness in PP availability, spot sellers managed to pass increases of around €100/ton this month in Italy despite insufficient demand. Moreover, early talks of a firmer May outlook have started to filter through the Italian market this week. There were an increasing number of reports from buyers this week that PP producers are planning to ask for further increases of €50-60/ton in May, while a trader commented that prices will continue to rise in May by €70-80/ton due to the ongoing tightness and rising spot propylene prices. Most buyers were skeptical about a firmer May outlook, with many continuing to buy on a needs only basis. Most buyers feel PP prices are becoming unsustainable in relation to the low end demand and anticipate a peak next month. The firm stance of European sellers has also helped the Turkish import market to gain ground, lending support to non-European sellers to revise their prices upwards over the past few weeks despite the considerable premium on non-European origins in Turkey. Euro based PP offers rose by €80-100/ton for April, while the import PP market saw increases of up to US$60/ton for other origins over the week.
Egypt’s PP players await new offers from the Middle East. Sentiment is reported to be firmer for May prices under the influence of the globally firm trend, better performance of some end-product markets, along with the dwindling local availability. A trader said that the PP price trend is firm these days, due to the news about OPC’s maintenance shutdown, as well as firm propylene costs, which he expects to support further increases.
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