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Spot prices for propylene rise across the globe

Spot propylene prices have moved higher in Europe, Asia and the U.S. recently based on healthy demand as well as supply limitations in Europe and Asia due to a naphtha shortage. The continuous increases seen over the past week in the upper end of the upstream chain were amongst other factors pushing spot propylene prices up in these regions. This all was related to Plasticstoday.com by Chemorbis, the Istanbul, Turkey-based provider of plastics pricing and market information.

The largest jump was seen in spot propylene prices in the U.S., with prices posting a massive jump of $225/ton compared to the previous week's notional level. Why the jump? Rumors of a higher done deal last week, reports Chemorbis, combined with December polymer grade propylene contracts that settled with a $66/ton increase. Market sources attributed the continuous hikes to the lack of resistance from derivative markets other than PP, which are absorbing the hikes despite the year-end slowness plus production problems at some of the country's propylene makers.

Bullish energy markets drove much of the price increase around the world. Crude oil prices breached the $90/barrel threshold, a two-year-high level, in day trading towards the end of last week before retreating slightly to settle above $88/barrel in the earlier days of this week as the appreciating dollar put a cap on the surge on crude.
 
Spot naphtha costs also jumped to record highs towards the end of the past week, with prices reaching the highest level of more than the last two years both in Europe and Asia. In Europe, naphtha prices on CIF basis rose more than $55/ton compared to the start of November, while Asian naphtha climbed by around $75/ton on CFR Japan basis over the same period mainly due to tight naphtha supplies as a result of the diesel shortage inside China which has slashed naphtha availability in that country.
 
In Europe, spot propylene prices rose €15/ton on a weekly basis, with the total increase coming to €30/ton when compared to prices at the start of November. Apart from higher upstream costs, one of the main drivers behind the recent surge in spot propylene prices was higher December contract settlements, which this month were settled at  €22/ton above November propylene contracts. Cracker operators complained about their squeezed margins pointing to the mounting naphtha costs overshadowing the higher propylene contracts.
 
In Asia, spot propylene prices have also firmed up by nearly $30/ton on an FOB Korea basis week-over-week, reaching a total increase of $100/ton when compared to price levels at the start of November. The main reason behind this bullish trend was tight supply caused by reduced operating rates at crackers in response to the naphtha shortage stemming from a gasoil production switch at China's refineries to meet the demand for this product in the country.

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