There is clear support for Asia’s propylene market from other global markets. There are also expectations amongst some Asian traders that naphtha will rise at the start of the new year because of the higher crude oil prices and extreme winter conditions both in the US and in Europe which turns refineries’ focus to heating fuels. Plus, the cracker maintenance season won’t begin in Asia until February at the earliest, meaning crackers will still be demanding naphtha for the next two months. However, traders’ willingness to pay more for propylene will depend on how confident they are about derivative demand.
Players in China this past week have expressed uncertainty regarding demand in January. Demand has been slow in recent days due to the end of the year while domestic price cuts inside the country have dampened buying interest along with the softer propylene prices. Plus, players pointed out the huge jump in PP imports to the country during the month of November which increased local supply.
Converters are waiting, meanwhile, hoping to see more supply as they note that attractive prices entered the market in North China from the new PP output from Baotou Shenhua and hope to see other new plants from 2010 ramping up operating rates. At the same time the Chinese government’s efforts to rein in inflation are still expected to make a greater effect starting in January while further measures could be on the table. The state of demand is likely to be seen soon after 2011 begins since players would need to quickly decide to take a position prior to the Chinese holidays which begin February 2 for Spring Festival and New Year.
Taking the factors into account, the general outlook according to players in the Chinese market is for stable to softer prices for both local and import PP while demand weighs down and costs push up on the market level.