A narrow propylene arbitrage from Asia to the US has opened this week with increased discussions between Asian producers and traders to fix cargoes, market sources said Friday.
Discussions intensified late this week after Taiwan Formosa Petrochemical concluded a tender Tuesday for a 10,000 mt first-half February loading cargo at $1,370/mt FOB Mailiao to a trading company, sources said.
The tender was initially for a 1,500-3,000 mt cargo but the company received a bid for a 6,000-10,000 mt cargo at $1,370/mt FOB, a company source said. After much deliberation, the company decided to accept the bid, the source added.
This is the second cargo the company sold to be shipped to the US. On January 15 the company sold a 12,000 mt parcel loading end-January/H1 February at $1,360/mt FOB Mailiao, for shipment to the US. Traders expressed surprise at the deal, describing the $1,360 price as "unbelievable."
But the tender results send signals to the market of the viability to move cargoes to the US.
A Chinese trader said Friday that a 5,000 mt cargo was diverted to the US at $1,300/mt FOB Taiwan.
Producers and traders said discussions are ongoing but there are issues in resolving the logistics.
"We are under discussion with a Western trader but the volume required is 10,000 mt. The maximum we have is 5,000 mt," a South Korean producer said.
"A Southeast Asian producer asked us a few days ago [if we are interested] to do a swap deal. They want to have a refrigerated cargo to ship to deep sea but we have no such cargo for more than 5,000 mt," an end-user said.
US spot polymer-grade propylene was assessed last Friday at 73.75 cents/lb ($1,625/mt). With freight estimated at $300-350/mt, sellers would be able to make a maximum profit of around $30/mt.
Asian propylene was assessed Friday at $1,295/mt FOB Korea.
