By John Richardson
PROPYLENE pricing is heading for “a crash” in Asia as a result of spot supply increasing by around 20,000 tonne/month, a senior industry source has told the blog.
Shell Chemicals will have a surplus 440,000 tonne/year of C3s from its Singapore cracker – in the process of starting up right now – as the oil-to-chemicals major failed to attract propylene derivatives investors, he added.
“There will also be a substantial surplus from the Map Ta Phut complex when the Dow Chemical/Siam Cement cracker is on-stream.”
The Dow/Siam cracker is again in the process of being commissioned.
A second industry source added: “The market is bracing itself for huge C3s surplus once Shell is fully operational.
“You can add to the Singapore and Thailand surpluses, 150,000 tonne/year from Vietnam (the PetroVietnam fluid catalytic cracker) and 100-150,000 tonne/year of additional supply from Saudi Arabia.”
Olefins supply has been pretty tight in Asia of late, helping to support the sustained rally in polyolefins (see graph below)
Source of graph: ICIS pricing
With a lot more polypropylene (PP) capacity due on-stream this year, it’s easy to forecast that this greater supply will combine with weaker support from feedstocks to bring about the long-awaited trough in PP pricing.
“We are talking about an awful lot of extra spot C3s into what is a very thinly-traded spot market. I can see propylene going from being a co-product back to by-product status,” added the first industry source.
More liquefied petroleum gas (LPG) cracking and changes in cracker severity will probably be methods producers use to reduce the propylene surplus.
PP producers might benefit. They should have greater ability to discount as they battle for market share against their polyethylene (PE) competitors.
(Ethylene markets will also become longer, with new merchant-market supply including 115,000 tonne/year from Shell in Singapore However, the total surpluses don’t look as if they will be as disruptive as those in C3s)
And the stand-alone PP producers – some of whom have had to shut down recently as a result of high C3 costs – may be able to resume production.