China’s propylene, PP prices rise on robust demand

Spanish Market: Petrochemicals
13/04/20

China's propylene and polypropylene (PP) prices rallied over the last few days, driven by robust PP futures and strong demand for fibre-grade PP for mask production amid the rapid spread of Covid-19 globally.

State-owned Sinopec raised its propylene list price by 1,000 yuan/t ($142/t) or 19pc from 9 April to Yn6,300/t ex-tank east China now. Private-sector propane dehydrogenation producer Ningbo Haiyue lifted its list price to Yn8,000/t ex-tank, up by Yn2,950/t or 58pc from 8 April.

Propylene spot prices reached Yn7,000-8,000/t ex-tank east China and Shandong today, a rise of 39pc from Yn5,300-5,500/t ex-tank a week ago. The current prices are equivalent to $853-977/t on an import parity basis.

Such steep hikes in China's domestic market have caught market participants off guard. Discussions for imported cargoes have stalled because market levels are difficult to determine. Deals were concluded at around $600/t cfr China early last week.

The main driver for the higher propylene prices is the downstream PP market.

The main September PP futures contract on the Dalian commodity exchange reached Yn7,297/t in the early afternoon today — the 7pc maximum allowable daily increase. The May contract also surged by 10pc to Yn8,056/t.

In the spot market, PP raffia prices in east China rose to Yn9,000-9,300/t ex-warehouse today, up by Yn1,800-2,000/t or 26pc from last week.

The shift in production away from the raffia grade to fibre-grade PP, the raw material for surgical masks, has led to tight supply of the PP raffia grade. Fibre-grade PP is now three to four times the price of the raffia grade. Around 26pc of PP capacity in China is now focused on producing fibre-grade PP, compared with just 5pc in late March.

A series of scheduled PP plant shutdowns — including Shanghai Secco's 250,000 t/yr unit, Sinopec Zhenhai's 300,000 t/yr unit, CNOOC Shell's 400,000 t/yr facility, and three major coal-to-olefins units with a combined capacity of 900,000 t/yr — has also tightened spot supplies.

Sinopec and PetroChina's polyethylene and PP inventories declined to 960,000t today, falling for a fifth consecutive week from 1.27mn t on 18 March.

Other propylene derivative plants, including major Shandong-based oxo-alcohol and propylene oxide producers, are facing negative margins and starting to cut operations.

By Becky Zhang and Cora Wang

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