The European spot propylene market faces pronounced bearish pressure on broad-base inventory length and wide spread containment issues amid thin derivative demand, market sources said Friday.
Despite industry wide scaling back on steam cracker run-rates, selling interest is outpacing spot demand. Spot polymer grade prices were assessed at Eur790-795/mt ($993-999.5/mt) FD NWE Thursday and were talked at Eur780-800/mt FD NWE Friday. Last time spot prices were this low was in December 2009.
Most propylene derivatives suffered with weak fundamentals and therefore consumers refrained from additional spot propylene purchases. Some olefin producers, meanwhile faced containment issues, sources said.
With spot buyers retreating to the sidelines, selling interest turned more distressed in some areas.
"We are trying to sell 1,700 mt of chemical grade propylene and we are looking at Eur650/mt CIF or lower values but so far there has been no interest," one net seller said.
"There is no buying in the spot market. Noone is interested in spot volume," a trader said.
Some propylene derivatives markets managed length in their systems better than others. Oxo alcohol and acrilonitrile were seen coping better with the downward pressure, although a butanols producer said that in June European products struggled to compete against more competitively priced US product.
"We hope to regain our competitiveness in July and get closer to the US values," he said.
Other propylene derivatives such as polypropylene and propylene oxide meanwhile faced stronger downward pressure, with some propylene producers noting a more pronounced reduction in contractual volumes from these derivative segments.
With domestic outlets now limited, propylene producers looked at export option. There was talk of around 10,000 mt of polymer grade propylene being fixed out of Europe to China.
The product was heard loading from NWE and the Med regions, from two outlets, market sources said. Confirmations from the two parties and the trader involved in the sale was not immediately available.
In Fearnleys Gas Market report, however, it was reported that a fixture of 3 tanks of polymer grade propylene ex-ARA and one tank of butadiene, ex-Brindisi or 4 tanks of propylene were set to load by Maersk Global on July 10-15 to Far East Asia.
CFR China spot propylene prices were assessed at $1,321/mt CIF, while the freight between Europe and China heard pegged at $320-330/mt.
With the European FOB values heard around Eur780/mt level or $981/mt, the product could land in China at around $1,306/mt CIF, so there is a narrow arbitrage currently open. With Asian propylene prices rising, Europe could potentially export more volume, sources said.
