Europe could face a rise in polypropylene imports because prices elsewhere have fallen in August due to depressed demand in the Middle East and Africa, China’s devaluation of the yuan and lower feedstock costs in the US, industry sources said this week.
Import prices into both Turkey and North Africa have fallen steeply in recent weeks with the lack of demand seen in July carrying over into August.
As a result offers from the Middle East have fallen over $100/mt to both regions this month.
Homo injection prices were assessed at $1,120/mt CFR North Africa Wednesday, down $20 on the week while CFR Turkey prices were assessed at $1,191/mt, down $76.
Converters in North Africa and the Middle East had purchased no more than required in August, postponing inventory growth on bearish forward expectations.
By comparison, prices in Europe were Eur1,250/mt ($1,395/mt) FD NWE Wednesday.
The Middle East netback price was at $1,001/mt FOB Wednesday, falling $40/mt since last Thursday. With freight to NWE pegged at $60/mt, a spread of over $300/mt may exist.
So far, however, traders have not yet capitalized on the arbitrage.
“Supply in Europe is not tight at the moment and will align a little more with these levels,” a trade source said.
Expectations of a fall in feedstock propylene prices in September in conjunction with the devaluation of the yuan could push prices from the Middle East down further.
A weaker yuan has made imports to China more expensive.
Import prices have reacted by falling below domestic levels for the first time in six months Wednesday.
China domestic PP raffia was assessed at Yuan 8,100/mt on August 19, or around $1,016/mt on an import parity basis, down Yuan 200 from the previous week but Yuan 250 higher than on August 5, before the yuan devaluation.
China’s central bank on August 11 changed the way it sets the yuan rate against the dollar, which led to a 1.9% devaluation of the domestic currency the same day.
The yuan has since depreciated by 2.9% as of Wednesday, with the yuan at 6.3976 to the dollar.
Elsewhere, US PP export prices have fallen in August due to cheaper propylene.
Export pricing for US PP slipped $22 from a week earlier assessed Wednesday at $1,301-$1,323/mt (59-60 cents/lb) FAS Houston for homopolymer injection grade and $1,345-$1,367/mt (61-62 cents/lb) FAS Houston for co-polymer.
