European propylene spot values pegged at premium to contract price in tight market
London (Platts)–14 May 2018 546 am EDT/946 GMT
The European propylene spot market continues to show signs of tightness, with spot prices heard pegged at a premium to the industry-settled May contract price, according to market sources.
S&P Global Platts last assessed the European spot price of polymer grade propylene for delivery 3-30 days forward at Eur998.50/mt (about $1,197/mt) Friday, up Eur2/mt on the day, and Eur7/mt on the week.
In the week to Friday, spot prices of polymer grade propylene were pegged at a 3%-5% premium to the May CP. The last time propylene traded at a premium to the CP was in 2017, according to Platts data.
Sources said the market was tight with talk of unconfirmed supply problems in Northwest Europe and ongoing planned turnarounds in Europe.
“There is no product available,” one source said.
A vessel carrying 5,000 mt of propylene was heard going to Northwest Europe from Houston.
“Demand is healthy at the moment and if market players want to get material, they will have to pay higher prices or wait until June when the market is expected to be more balanced,” a second source said.
In the US, talk of tight supply with ongoing planned turnarounds and improved downstream demand have also pushed up spot prices which have been climbing since April.
US spot prompt-month polymer-grade propylene was last assessed at a three-month high of 49.50-50 cents/lb ($1,090.98-$1,102/mt) FD USG Friday.
In the meantime, the European petrochemical sector is still opting for high volumes of naphtha as cracker feedstock in Q2, as demand for heavier co-product yields and flexibility issues at crackers have sustained demand.
On Friday, European physical propane cargoes were assessed at a discount of $133.50/mt to naphtha cargoes, $30.50/mt shy of their lowest point in nearly three years on April 24.
According to some sources, while a wide propane discount should encourage increased amounts of LPG cracking over naphtha, the latter remains supported because end-users have already hit their maximum intake of LPG.
“There is a certain limit of LPG utilization, right now cracking capacities have reached their maximum and can’t increase it further, but there are still requirements yet to be filled,” said one source.
At the same time, recent tightness in the crude C4 and butadiene markets in Europe has meant olefin producers have an interest in using a feedstock that produces a heavier product yield.
On a weight basis, heavier feedstocks such as naphtha, yield higher amounts of C4s and butadiene than lighter feeds such as ethane and propane.
An oversupplied ethylene market and tighter propylene market, will only add further incentive for end-users to crack naphtha as the heavier feedstock yields less ethylene than LPG and more propylene than ethane.
Cracking light feedstocks yields more ethylene and less propylene, butadiene and pygas. Cracking 1 mt of ethane produces 0.8 mt of ethylene. Similarly, 1 mt of propane produces 0.4 mt of ethylene. This compares with just 0.3 mt of ethylene from cracking 1 mt of naphtha.
Ethylene is presently oversupplied as downstream polyethylene has not picked up as much as anticipated.
Platts polyethylene contract prices have yet to increase this month, despite the rise in the ethylene contract price.
The ethylene spot price is currently trading at an 11% discount to the MCP.