European petrochemical plant production issues and refinery maintenance have tightened regional propylene supplies this month, sources say.
The shortened supply has been exacerbated by a lack of imports, following a fall in the value of the euro against the dollar.
Combined with improving downstream demand, this has boosted prices.
Polymer-grade propylene prices were boosted to Eur886/mt FD NWE Friday from Eur833/mt in the last week of February.
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While chemical-grade propylene rose to Eur843/mt FD NWE from 817/mt over the same period.
In some cases, the limited propylene availability has caused force majeures.
At least 15% of European propylene production from crackers is now offline.
These include the largest of Total’s three crackers at its Antwerp complex and its cracker in Feyzin, France; Repsol’s cracker in Puertollano, Spain; the largest of Dow’s three crackers in Terneuzen, The Netherlands; and Versalis’ cracker in Dunkirk, France.
In the Mediterranean, a scheduled January-March outage at PropanChem’s propane dehydrogenation unit in Tarragona, Spain, coincided with rising prices in the region.
The plant, which has a propylene capacity of 350,000 mt/year, restarted on the March 16.
However, one trading source said the restart of the PDH plant would be equivalent to “a drop of water on a hot stone. There is too much [production] out of the market that one restart won’t make a dramatic change.”
The shortage of monomer has recently led to two force majeures.
Borealis declared force majeure on polypropylene deliveries from its plant in Schwehaschat, Austria, due to a force majeure situation at its third-party monomer supplier, a company spokeswoman said Wednesday.
A lack of monomer supply also led to a force majeure declaration on polypropylene production at LyondellBasell’s PP unit in Tarragona and Ferrara, Italy.
It was still unclear if the plants had emerged from it.
Chemical-grade propylene supply, produced at crackers and as a byproduct of refinery operations, saw greater pressure on supply due to production issues across oil refineries in Northwest Europe and the Mediterranean.
Among those refineries in maintenance were Germany’s largest, Mineraloelraffinerie Oberrhein (MIRO) in Karlsruhe; Shell’s in Pernis, The Netherlands; ExxonMobil’s in Port Jerome, France; Total’s in Lindsey, UK; and Isab, Italy, 80%-owned by Lukoil and 20% owned by ERG.
NO RELIEF FROM IMPORTS
Imports into Europe had been choked as the euro had fallen against the dollar. The euro this month was trading at lows not seen since 2003.
As well as the increasing expense of imports from dollar-based markets to Europe, Asia had also been heard experiencing tightened supply.
“Propylene is tight all over the globe,” another trader said.
Propylene in Asia has fallen in price by tightness due to a heavy turnaround period in South Korea over March-May.
The fall was attributed to falling crude oil futures in the West.
With supply as it is, European operating rates were heard increased in an attempt to meet demand and also on the significant rise in cracker margins.
Contract cracker margins were at Eur360/mt FD NWE on Friday, a high not seen since the end of January.
This contrasts with the Eur247/mt seen at end-February, a low not seen since December 2013.
Tightened supply for both ethylene and propylene, combined with rising downstream demand, has led to crackers running at or close to 100% of operating rates, sources said.
By comparison, crackers averaged operating rates of 78%-85% of capacity in 2014.
Propylene demand amongst polyolefins producers continued to be heard strong, however.
With prices for polymer-grade propylene 3% above the monthly contract price and those for chemical grade just 2% under on Friday, buyers had been heard reluctant to pay more on profitability fears post polymerization.
Amid bullish fundamentals, price decreases were not expected for April.
As a result, market sources said, an increase of Eur20-Eur30 in contract prices for next month were expected despite a fall in upstream naphtha.
Naphtha, the primary feedstock for propylene production in Europe, stood at $533/mt CIF NWE when propylene last settled February 27.
Naphtha was assessed at $493.5/mt Friday.
– Platts.com
