In Asia, propylene costs started to react to the dramatic decreases of the last weeks in oil prices, which went below the $80/bbl threshold early this week and today (Aug 11) sat at about $83/barrel for WTI crude, down about $17/barrl in less than one month.
According to plastics pricing service ChemOrbis, the biggest reaction towards these decreases in oil prices occurred on Thursday (Aug.10) as spot propylene prices shed $80/ton on FOB Korea basis.
Spot propylene prices had started the month of August with increases of $220/ton when compared to July. In the first week of August, propylene prices had maintained that level, reported ChemOrbis, but then this week started with $20/ton decreases from last Friday. Then yesterday the largest drop in price occurred.
China's crude oil imports dropped to their lowest level in nine months in July due to maintenance shutdowns at several of the country's refineries, which reduced demand. On top of this, China's crude oil imports may drop further in the upcoming months as seven major refineries with a combined capacity of 707,800 barrels/day are scheduled to be shut in the third quarter, according to oil analysts.
ChemOrbis notes that the bearish upstream and economic developments are making themselves known in the Asian polypropylene (PP) markets. In China, domestic suppliers, who mostly maintained their prices at the beginning of the week, issued CNY200-400/ton ($31-62/ton) decreases on Aug. 10 in order to encourage better demand. Distributors and traders had already started to cut their prices to encourage buying interest with import homo-PP prices decreasing $20-50/ton on a week-over-week basis.
PP is not the only material whose price is impacted, notes ChemOrbis. A trader at mid-week reported cutting his PE offers by $20-50/ton for material from the Middle East and Southeast Asia yesterday. At the beginning of this week, a distributor stated that it reduced its prices for locally-held HDPE and LLDPE by CNY200-300/ton ($31-47/ton) while implementing larger declines of CNY300-400/ton ($47-62/ton) on its LDPE film grade prices. The same sort of moves are being made in Southeast Asia with buyers on the sidelines and traders wanting to destock. A distributor in Vietnam told the pricing service that he already cut his offers for locally held LDPE and LLDPE in line with the price cuts from China, adding, "I expect to see further declines in the days ahead." Likewise in India, two distributors reported on Tuesday of this week adjusting their local offers for PVC, HDPE and LLDPE by INR1000-2000/ton ($22-45/ton) in order to spur sales.
In Turkey, where ChemOrbis is headquartered, market participants do not seem to be as panicked as their Asian counterparts. A few distributors told ChemOrbis that buying interest has dropped suddenly in recent days while buyers mostly said they want to wait for the market picture to become clearer before engaging in new purchases. Players are also raising concerns about the dollar/lira parity that has been constantly rising.
The bearishness has not made itself felt as noticeably on the Egyptian market yet, where demand was already slow due to Ramadan.