Trading in the downstream propylene derivatives markets in Asia have come to a standstill amid weak demand and high feedstock propylene prices, market sources said Wednesday.
Asian propylene prices were at a 29-week high Tuesday at $1,505/mt FOB Korea. With the shut down of Taiwan's CPC Corp.'s No. 5 naphtha-fed steam cracker last Friday, after a fire at its refinery and petrochemical complex in Tashe, Kaohsiung, industry sources expect propylene prices to continue rising.
Downstream propylene derivatives producers were trying to pass on the higher feedstock costs to end-users, but were facing increasing difficulty as demand remained weak, the sources said.
The largest downstream derivatives market, polypropylene, has been facing weak demand since the Lunar New Year holidays in second-half January. But PP producers and traders are reluctant to lower their prices further to attract buying interest following the recent hike in feedstock propylene costs.
This has led to thin trading in the downstream market, with offers staying low at around $1,470-1,500/mt CFR China and little buying interest seen. With PP offer prices of $1,470/mt CFR China and propylene costs hitting $1,505/mt, PP producers are suffering a negative margin of minus $185/mt.
Non-integrated PP producers typically need to price their product $150/mt above feedstock propylene prices to break even.
Another propylene derivative, acrylonitrile, hit a 35-week high on March 27 at $2,390/mt CFR Far East Asia but there has been no discussions since then with the bid-offer gap seen widening, market sources said.
There were no deals heard concluded for the past two weeks with offers at above $2,400/mt CFR Asia and buying ideas below $2,300/mt CFR, a trader said.
