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Friday, July 1, 2022

Asia-US Propylene arbitrage opens after at least one year

The arbitrage window to move Asian propylene cargoes to the US appears to have opened, with a 12,000 mt FOB Taiwan cargo heard moving West for the first time, several sources said Thursday.

The last time a cargo moved from Asia to the US could not be confirmed, but market sources said it was at least 12 months ago.

Market participants said Taiwan’s Formosa Petrochemical sold a 12,000 mt first-half October-loading cargo at $1,300/mt FOB Mailiao to a trading company Tuesday through private negotiations. A source named the trader as South Korea’s Apex Energy. Apex declined to comment. Market sources said the cargo is set to be discharged in the US mid- or H2 November.

A Southeast Asian trader said the cargo was sold at “closer to 67-68 cents/lb as it is a November cargo.” Another market participant said he had heard it was concluded at 68 cents/lb, equivalent to $1,499/mt.

“The average freight is now $250/mt but the 12,000 managed to move at $140/mt,” the Southeast Asian trader said.

Another source said that freight to move from Asia to the US could be $200-250/mt for a 12,000 mt refrigerated cargo, while it could be over $300/mt for lower volume cargoes of 5,000-10,000 mt. He added that it is possible that a newly launched vessel was chartered and so there was a huge discount [with the deal concluded below $200/mt].

“Freight is $250-280/mt but that level is a one-way price. If the charterer is doing a round trip there may be some discount,” a Northeast Asian trader said.

The exact spot price for the refrigerated cargo could not be confirmed but if the $140/mt freight rate was indeed concluded, the South Korean trader could have a profit of nearly $60/mt.

US spot polymer-grade propylene for October traded twice at 76.5 cents/lb ($1,686/mt) on Wednesday. With freight at a conservative estimate of $300-350/mt and assuming the same FOB Taiwan price of $1,300/mt, sellers would be able to make a profit between $36/mt and $86/mt.

“We’re trying to see if a second [cargo] could be managed, but not sure if I can,” a Southeast Asian trade source said Thursday.


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