Europe propylene supply lengthening rapidly – sources

Focus article by Nel Weddle

LONDON (ICIS)–European propylene supply is rapidly turning long, particularly in the coastal sector, market sources said on Thursday.

“There are quite some volumes on offer, people are trying to get rid of propylene,” a source said.

“Several are asking me to buy, time swap or store material on their behalf,” the source added.

“Its true,” a second source said, “people are desperate to squeeze material wherever they can.”

“There is a lot of product available at the coast,” a third source said.

“I haven´t done any deal… unfortunately, because we have quite a lot of CGP [chemical grade propylene] and PGP [polymer grade propylene] to sell,” a fourth source said.

Sources mentioned congestion and queueing barges at certain jetties in ARA (Amsterdam, Rotterdam, Antwerp), and one source said the loading of one of its own barges had been delayed by as much as 15 days, which would have a significant impact on its own balances.

The supply length is developing because of a combination of factors.

Cracker production is running at a high rate, as most planned and unplanned issues have been resolved. In particular the Moerdijk, Netherlands, and Lavera, France crackers are back online, albeit not yet at full rates.

Cracker margins are very healthy, and ethylene supply still somewhat snug, so operators are running crackers as at high rates as possible, although there remains some heat-related production and logistical constraints in the inland market.

“Ethylene is healthy, and crackers are making a fortune,” a trader said.

“Every cracker that can, is running at quite high rates,” the first source said.

Healthy rates at refineries, and imported volumes ex-US, Brazil and Asia, are also playing a part.

The recent decline in crude oil and naphtha values has also pushed buyers to the sidelines, in anticipation of a reduced contract price (CP) for September.

“Buyers are holding back, it’s difficult to place molecules,” a second trader said.

No spot deals for either PGP or CGP have been reported so far this week.

Some sources said this was more to do with the lack of physical space in which to put additional volumes and less to do with prices.

Although the arbitrage window with the US is “wide-open”, a source said, there is little appetite for spot volumes with longer lead times.

“I have tried to persuade people with attractive offers, but people just can’t take it,” the first trader said, adding “[company name] would love to buy at these prices but can’t.”

The supply situation in the inland market is a little more balanced due to heat-related operating rate reductions, and logistical headaches caused by the low water levels on the river Rhine. Even so, supply is described as improving, and should improve further still when the MIRO refinery FCC (fluid catalytic cracker) comes back online as expected over the 15-16 August weekend.

Spot pricing indications were few and far between due to the lack of deal evidence.

“We are certainly back to the “normal” discounts of 3-5% for PGP at least,” a fifth source said.

Others mentioned the possibility of double-digit discounts soon being seen for PGP – some thought this unlikely, while others suggested that any remaining unsold cargo in August would have to be done at extremely attractive numbers.

Coastal CGP last traded at €730/tonne CIF (cost, insurance, freight) NWE (northwest Europe) two weeks ago, but current discussions are centreing on the low to mid €600s/tonne.

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