Argus Propylene and Derivatives

Formerly Argus DeWitt Propylene

Issue 18-2 Wednesday 10 January 2018

Highlights Market snapshots

Americas Global prices $/t

Timing Low High Mid
„„ US prices quickly moving higher amid ongoing PDH produc-
tion issues US
Poly grade USGC contract Dec 1,102
„„ Stocks low as preparation for spring turnarounds begin
Poly grade USGC contract Nov 1,080
„„ PP producers may cut production as monomer prices rise Poly grade USGC contract Oct 1,058
„„ Improving demand outlook may be tempered by rising local Chemical grade USGC contract Dec 1,069
Chemical grade USGC contract Nov 1,047
prices
Chemical grade USGC contract Oct 1,025
Poly grade USGC pipeline spot 1,213 1,268 1,240
Europe Refinery grade Mt Belvieu spot 832 843 838
C3 alkylation USGC calc value 1,067 1,076 1,071
„„ Spot discounts to MCP narrow
PP Homo GP IM del EOR 4 Jan Dec 1,499 1,565 1,532
„„ Market anticipates tighter balance in 2018 Western Europe
„„ Turnaround programme smaller than in 2017 Poly grade NWE contract Jan 1,096
Poly grade NWE cif spot 1,053 1,076 1,064
„„ Crude approaches $70/bl, but naphtha and LPG rise more
Chem grade NWE cif spot 981 1,041 1,011
slowly PP Homo GP IM NWE del 4 Jan* Dec 1,629 1,696 1,663
Asia-Pacific
Asia-Pacific Poly grade Taiwan contract Nov 910
Poly grade Taiwan contract Oct 895
„„ Naphtha cracker margins rebounded Poly grade Taiwan contract Sep 880
„„ PP edged up, supporting the propylene market Poly grade SE Asia cfr spot 930 940 935
„„ ACN prices firmed again amid a tighter balance Poly grade SE Asia fob spot 970 980 975
Poly grade NE Asia cfr spot 1,040 1,060 1,050
„„ Southeast Asia prices removed from global chart due to Poly grade NE Asia fob spot 1,020 1,025 1,022
poor liquidity Raffia cfr China 4 Jan 1,140 1,160 1,150
*freely negotiated monthly prices

Acrylonitrile $/t
Timing Low High Mid
World PG propylene prices $/t
USGC fob prompt ¢/lb 75 77 76
US contract NWE contract NEA spot Europe T2 contract Dec 2,307 2,349 2,328
USGC spot NWE spot Europe T2 contract Nov 2,210 2,251 2,230
1,300 Europe T2 contract Oct 2,175 2,215 2,195
China cfr spot 1,750 1,800 1,775
1,200
1,100 Related feedstocks
Delivery Low High Mid
1,000
Ethane Mt Belvieu non-LST ¢/USG Jan 24.75 26.25 25.50
900
Propane Mt Belvieu non-LST ¢/USG Jan 93.50 94.63 94.06
800 Propane ARA large cargo $/t 535.00 541.00 538.00
700 Propane Argus Far East Index $/t 579.75
Propane S China refrig cfr $/t 2H Jan 578.00 581.50 579.75
600 Butane Mt Belvieu non-LST ¢/USG Jan 95.25 97.50 96.38
500 Naphtha full-range cif USGC ¢/USG 158.62 161.62 160.12
9 Mar 16 19 Oct 16 31 May 17 10 Jan 18 Naphtha 65 para NWE cif $/t 594.25 595.25 594.75
Naphtha Japan c+f $/t 605.50 611.00 608.25

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 Argus Propylene and Derivatives Issue 18-2 Wednesday 10 January 2018

Americas

US/Canada US prices ¢/lb

Timing Low High Mid
The US propylene market is starting the new year in a position
similar to January 2017 -- with tight supply, anxious buyers, Propylene
and the threat of a large jump in monthly contract prices. Poly grade USGC export spot 57.50 60.00 58.75
Poly grade USGC pipeline spot 55.00 57.50 56.25
Ongoing production problems at Gulf coast PDH units have
Refinery grade USGC spot 37.75 38.25 38.00
cut available supply just as buyers need product to prepare
Refinery grade USGC spot MTD Jan 36.75
for spring turnarounds and anticipated seasonal derivative C3 alkylation USGC calc value 48.40 48.80 48.60
demand. C3 fuel USGC calc value 22.00 23.00 22.50
The US economy looks set for improved growth in 2018, Polypropylene
which will help to boost demand across all end-use sectors, PP Homo GP IM del EOR 4 Jan 68.00 71.00 69.50
but a keen eye on global competitiveness will be key to cap- Copolymer del EOR 4 Jan 70.00 73.00 71.50
Acrylonitrile
ture the opportunity.
USGC fob prompt 75.00 77.00 76.00
Little spot activity has been reported in recent days as
scant product has been available on the spot market. Prices US contract pricing
of refinery grade (RGP) and polymer-grade propylene (PGP) re- $/t ¢/lb

flect daily assessment ranges for the week as no deals met the Poly grade
required methodology due to low volume for RGP or non-Mont Dec 1,102 50.00
Belvieu, Texas, location for PGP. PGP prices have hovered Nov 1,080 49.00
Oct 1,058 48.00
near 57¢/lb ($1257/t) in recent days, although today a deal for
Chemical grade
prompt delivery was recorded at 62¢/lb ($1367/t).
Dec 1,069 48.50
Operating snags continue to delay full production at the Nov 1,047 47.50
new propane dehydrogenation (PDH) unit at Mont Belvieu. Oct 1,025 46.50
Enterprise indicates that it may be as late as February before
it can approach near full rates at its 750,000 t/yr unit. The
market had anticipated PGP volume from this PDH throughout propane and butane prices have significantly reduced available
2017 so its continued absence has been disruptive. supply as light crackers favor ethane feed.
Additionally, the 750,000 t/yr PDH unit at Freeport, Texas, The single bright spot has been refinery production, with
shut last month due to operating problems, and production is US operating rates recorded at seasonally high levels. The
not expected to resume this month. The PDH outages com- US Energy Information Administration (EIA) reported rates at
bined with low steam-cracker propylene output due to high 95.3pc for the week ended on 5 January, marking the seventh

US nonfuel use propylene inventory ’000bl US Gulf coast NGL prices ¢/USG

5 year range 2018* 2017 2016 Ethane Propane Butane

150
6,500
125
5,500
100
4,500
hh 75
3,500
50
2,500
25
1,500
Jan Feb Mar Apr May Jun Aug Sep Oct Nov Dec 0
28 Jun 16 30 Dec 16 6 Jul 17 9 Jan 18
— EIA

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Issue Ref: 344306

Argus Propylene and Derivatives
Americas
US propylene exports by regional destination
NAmerica LAmerica WEurope NEAsia Other
75,000
60,000
45,000
30,000
15,000
0 -250,000
Nov 14 May 15 Nov 15 May 16 Nov 16 May 17 Nov 17
-GTIS, Panjiva
consecutive week with rates above 92pc. December and Janu-
ary are typically weak gasoline demand periods, but healthy
exports have supported stronger operations at US refineries.
Latin America has been the primary outlet, mainly due to
lower operating rates at local refineries in Mexico and Brazil.
EIA inventory data for nonfuel-use propylene is significantly
below seasonal norms, with 44pc less stock than in this week
in 2017 following a near continuous drawdown since last sum-
mer's hurricanes. EIA data only represent inventory held by
refiners, which is typically about one-third of the total. RGP
demand has been strong in recent months as it was used to
feed Gulf coast splitters to make up for missing PGP volumes.
The larger volumes of polymer and chemical grade held
by chemical companies is not surveyed by EIA but instead is re-
ported by the American Fuel and Petrochemical Manufacturers
(AFPM) about a month after the quarter's close. Considering
the low production from crackers and PDH units, this volume is
anticipated to be low also.
Monthly contract discussions have been slow to start as
participants gradually return from year-end holidays. Early
nominations were only a few cents up but more recent indica-
tions are for a rise of 8 to 9¢/lb over the December contract at
50¢/lb ($1102/t). 2018 prices are strong in all regions but such
a large jump will again place the US well above other regions,
and recalls the 10¢/lb jump seen in January 2017 that led a
very volatile first half of the year. Higher prices through the
fall have eaten into monomer and polymer exports as arbi-
trage opportunities disappeared.
The contract process may shift this year as at least one
Copyright © 2018 Argus Media group
Licensed to: Ashley Organ, Argus Media Inc (New York)
Issue 18-2 Wednesday 10 January 2018
t PP trade t
Total imports Total exports
100,000
50,000
0
-50,000
-100,000
-150,000
-200,000
Jan 15 Aug 15 Feb 16 Sep 16 Apr 17 Nov 17
major producer has withdrawn from the monthly discussions,
citing a preference for market-based pricing. Certainly the US
market needs new reference points as production processes
and feedstocks diversify, but determining an agreed metric
has proved elusive. The market has also lost liquidity as the
number of spot transactions declined throughout 2017, creat-
ing more volatility in reported values. Some discussion of a
propane-based reference has emerged as it becomes a more
significant portion of the feedstock slate for PDH units and
steam crackers.
US polypropylene (PP) production is likely to decline this
month because some producers are expected to pull back on
output due to high monomer costs, and others are beginning
or will soon begin turnarounds. There are at least three turn-
arounds that have been discussed for this month or next, but
start dates or the lengths of those turnarounds could not be
confirmed. Integrated producers are less likely to slow down.
But non-integrated producers, facing potential increases of
as much as 9¢/lb in monomer costs, will run only as hard as
needed to meet obligations, not wanting to build high-priced
inventories.
December production and demand data have not yet been
released, but production rates were described as seasonally
low, with weak seasonal demand as converters took downtime
over the holidays. While year-to-date sales through November
rose by around 1.1pc from the same period in 2016, a year-to-
date decline in imports of around 31pc suggests that apparent
growth in the market consists of domestic producers regaining
market share from imports.
Page 3 of 11
Argus Propylene and Derivatives Issue 18-2 Wednesday 10 January 2018

Americas
Brazil propylene exports, Jan-Dec ’000t
Producers' order books this month are improving compared
with December, but some of those orders could be cancelled Germany Argentina Belgium Colombia
when news of the higher monomer prices spread. While con- Mexico Netherlands Paraguay
verter inventories are not believed to be long, converters will 100
try to avoid building inventory where possible. 90
80
Spot availability is limited, and costs have started to rise
70
slightly. Generic prime homopolymer PP is being offered, in 60
some cases at around 69-71¢/lb, with impact copolymer around 50
40
72-73¢/lb. In other cases, producers have gone from offering 30
firm prices to offering prices on a PGP plus basis, in an effort 20
to protect themselves from the high monomer costs. 10
0
Contract prices for December largely settled higher by 2016 2017
1¢/lb, tracking the movement in the PGP market. However,
because of contract resets for 2018, which were made retro-
Brazil acrylonitrile exports ’000t
active to include December, many buyers actually saw their
prices decline by 2-3¢/lb, as producers gave back margins they 2016 2017
earned in the last half of last year in an effort to retain busi-
30
ness.
25
Imports remain limited, even with the high monomer
prices, as US buyers believe US prices will decline by the time 20
product ordered today arrives at their doors. Higher crude 15
prices are also pushing up costs for international PP producers.
10
Total PP imports declined to 44,792t in November, down
by 3.5pc from October, with homopolymer imports falling by 5

10.7pc and copolymer imports rising by 5.6pc over the same 0

period, according to US International Trade Commission data. Mexico
South KoreaIndia Peru Turkey US China Other

Total PP exports also dropped to 134,728t in November, down

by 8.7pc from October, with exports of homopolymer falling
by 12.3pc and exports of copolymer dropping by 3.4pc over
the same period. Year-to-date exports gained 16.7pc compared
with the same period in 2016.
Latin America
Brazil’s propylene market is balanced, and propylene exports
fell in 2017 as the domestic market demand grew. The country
exported 65,400t in the January-December period, 28.3pc less
than in 2016, with lower sales to Colombia and no exports to
Mexico. Brazil exported a 3,100t propylene cargo to Colombia
at $866/t fob in December.
Braskem wrapped up tests at it’s Camaçari, Bahia, facility
for replacing naphtha with US imported ethane in one of its
crackers. The company replaced 30pc of naphtha with ethane
in one of its crackers at the site, yielding a boost in ethylene
output by 1-2pc. The production of co-products dropped by
5-6pc on propylene, 2pc on butadiene and 10-12pc on aromat-
ics.
Brazil’s domestic polypropylene (PP) sales, imports and ex-
ports grew in 2017. Exports reached 548,900t, 2.4pc more than
in 2016, mostly bought by Argentina, Peru and the US. Imports
increased by 7.7pc to 309,700 t, with Argentina, Colombia and
Saudi Arabia as the top sellers. Brazil remained in 2017 a PP
net exporter, with exports topping imports by 260,200t or by
$245.6mn for the year.
Domestic PP prices rose by R$200/t ($61.60/t), including
taxes, in January after increasing by R$100-200/t ($57/t) in
November.
International acrylonitrile prices remain strong and Brazil
continues to export most of its production. The domestic
market equals only 10pc of local production. Brazil exported
7,800t in December, with 2,900t going to India at $1,680/t fob,

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Argus Propylene and Derivatives Issue 18-2 Wednesday 10 January 2018

Americas

2,500t to Mexico at $1,573/t fob and 2,400 t going to South
Korea at $1,770/t fob.
The Brazilian unit has been exporting acrylonitrile to
Mexico since August 2016, when production stopped in that
country after state oil monopoly Pemex broke its propylene
supply contract for Mexico’s single acrylonitrile producer.
Mexico is now Brazil’s top buyer, taking 35.7pc of the export
total in 2017. Brazil’s acrylonitrile exports in 2017 fell by 4.1pc
from 2016 to 78,000t, with smaller volumes sold to India and
China.
Camaçari’s acrylic acid unit had operating problems and
BASF shut it for 15 days of maintenance on 24 December. It
plans additional maintenance in March. Brazil has been ex-
porting acrylic acid and 2-ethylhexyl acrylate since 2015 when
production started in the country. Exports of acrylic acid in-
creased by 19.2pc to 24,000t in 2017 from 2016, while exports
of 2-ethylhexyl acrylate, totaling 4,300t, reduced by 1.2pc.
The US is the main destination for acrylic acid and Belgium is
the top buyer of 2-ethylhexyl acrylate.
Brazil’s propylene oxide unit is running at full capacity,
fed by propylene from northeastern refinery Rlam and from
Camaçari’s Bahia cracker.

Western Europe

The European market is reasonably balanced but there are Western Europe prices €/t
Timing Low High Mid
expectations that the market could tighten because of strong
demand for derivatives and preparations for spring turn- Propylene

arounds. This is supporting prices and limiting liquidity to Poly grade NWE cif spot 880 900 890
Chem grade NWE cif spot 820 870 845
some extent. Some PGP deals have emerged at January MCP
Polypropylene
minus 1-2pc and similar discounts are being discussed for Raffia del spot 4 Jan* Dec 1,260 1,315 1,288
February. This may reflect the expectation of a structurally PP Homo GP IM del spot 4 Jan* Dec 1,350 1,405 1,378
short market in the first half of 2018, as much as any underly- Copolymer del 4 Jan* Dec 1,405 1,460 1,433
ing tightness, which is yet to emerge. There are supply options Acrylonitrile
T2 contract Dec 1,929 1,964 1,946
for buyers amid high production rates and some derivative is-
T2 contract Nov 1,865 1,899 1,882
sues, but producers’ preference is to manage this internally or
T2 contract Oct 1,845 1,879 1,862
with swaps, rather than in the spot market. Most buyers have *freely negotiated monthly prices
covered themselves well contractually, but there is demand
Western Europe contract pricing (MCP)
at the right price. Integrated producers are most exposed to a
$/t €/t
short market, while contractual nominations remain high and
Poly grade
relatively low European propylene prices are creating some
Jan 1,096 912
incremental derivative export opportunities.
Dec 1,061 892
Production is running well with an issue at a cracker in Nov 1,000 860
the south of France the only problem of note. Storms and high
Rhine water levels that created some logistical challenges in closed because of strong US spot pricing. Some traders are
Germany in the past week are now over. No new activity has exploring the possibility of European exports to the Americas.
been reported in the CGP market. There is buying interest for Finding product in Europe and arranging logistics are difficult,
CGP, but buyers still aim to achieve high single-digit or double- but if US pricing remains strong or increases further, the arbi-
digit discounts for various sources of material. Sellers see trage may become attractive, putting further upward pressure
smaller discounts. CGP discounts are much narrower than a on European spot and contract pricing.
year ago, when a logistical problem was pushing more refinery The expectation of a short market in 2018 is down to both
material into the market. supply and demand side fundamentals. Economic growth is
The arbitrage for imports from the US, which some had driving higher derivative use locally and globally. European
expected to cover a structural shortfall in Europe, remains derivative capacity has been stretched in recent years, with

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Argus Propylene and Derivatives
Western Europe
debottlenecking of some units and the continued operation of
others that had previously been earmarked for closure. New
European acrylic acid capacity is scheduled to start up in the
second quarter, tightening the balance in the pipeline system.
Egypt is also likely to continue to pull supply from the Mediter-
ranean region when available.
Cracker and refinery operating rates are expected to re-
main high in 2018. But flexible cracker operators will continue
to increase the amounts of ethane they crack and LPG flex-
ibility has increased again, although it will depend on rela-
tive pricing of feedstocks. Some refiners have also reassessed
downwards the propylene yields that they achieve from using
high-activity catalysts. The effect may be small, but notice-
able in a tight market.
The propylene maintenance schedule for 2018 is more
moderate than 2017 and less concentrated geographically.
Both of these factors should make it easier for the industry
to cover unexpected delays or additional unplanned shut-
downs. Planned production losses peak in April in the spring
and October in the autumn, but both peaks are lower than in
2017. The relatively late addition of two crackers in Germany
in the spring added an unexpected complication to the plan-
ning process and will partly coincide with maintenance at a
large refinery further inland. Refinery maintenance begins in
January, but will initially be balanced by associated derivative
shutdowns.
LPG prices in Europe, particularly butane, eased relative to
naphtha in late December and early January. LPG discounts to
naphtha are the widest they have been since the end of July
2017, with propane discounts to naphtha approaching 10pc
and the butane discount already at more than 10pc. This has
WE planned propylene production losses ’000t
Cracker Other
120
100
80
60
40
20
0
Jan 17 Jun 17 Dec 17 Jun 18 Dec 18
Copyright © 2018 Argus Media group
Licensed to: Ashley Organ, Argus Media Inc (New York)
Issue 18-2 Wednesday 10 January 2018
been despite recent cold weather, particularly in the US, but a
higher-than-expected US stockdraw this week may give global
LPG prices some new impetus.
Naphtha prices have also been under some relative pres-
sure. Refineries are running hard to meet demand for distil-
lates because of the cold weather. This has contributed to the
rise in crude prices, with benchmark North Sea Dated close
to $70/bl, but more naphtha has also been pushed into the
market. Naphtha costs have not risen as fast as a result, and
its margin to North Sea Dated has turned negative.
The effect of the relative strength of LPG prices to naph-
tha in the second half of 2017 showed in third-quarter olefins
production data. The propylene-to-ethylene production ratio
rose slightly to 0.72 from 0.71 in the second quarter, as crack-
ers shifted their feedstock towards naphtha. But the ratio
remains near historic lows, despite the sustained strength of
LPG prices in the period.
Demand across derivatives remains strong. The PP mar-
ket is typically robust in January, as converters return from
a break in production during the Christmas holiday period
and prepare their stocks for the upcoming spring peak. Initial
order entry is stable and matching high expectations. A strong
economy, higher crude prices, rising international propylene
values and concerns about a tight European propylene market
are raising buying sentiment. Converters and traders feel that
material bought now is unlikely to decline in value in the short
term. Sellers were disappointed by the outcome of PP contract
negotiations at the end of 2017, and most have announced a
€40/t increase to the market in January in an effort to regain
some margin over a €20/t rise in the propylene MCP.
Acrylonitrile demand is good from all applications and
European propylene-to-ethylene production ratio
0.79
0.77
0.75
0.73
0.71
0.69
2Q11 2Q12 2Q13 2Q14 2Q15 2Q16 2Q17
— Petrochemicals Europe, Argus
Page 6 of 11
Argus Propylene and Derivatives Issue 18-2 Wednesday 10 January 2018

Western Europe

producers are running flat out. One producer has a backlog to
fulfil in January after a small production issue in December.
There are also preparations for maintenance and cleaning at
units in Germany and the UK in March and April, respectively.
Some January T2 contract prices have been settled €38-40/t
higher than December, but a complete range of settlement
is still to be confirmed. The settlements so far are another
margin improvement over feedstocks, which rose by €34/t.
December contracts were settled at a €64-65/t increase.
The restocking of de-icing agents in January following
recent cold weather is expected to give a lift to already strong
propylene oxide demand.

Asia-Pacific
Asian cracker cash margin spot $/t Outages
Shutdown Plant KTA Duration
L: C2 fob S Korea L: C3 fob S Korea
R: Cash margin Lotte Titan RFCC 160 started earlyDec17
1,400 1,400 CPC No 4 Cracker 230 16Nov17-19Jan
1,300 SK Advanced PDH 600 20Nov, 1 month
1,200 Zhejiang Xingxing MTO 390 20Nov-midDec
1,200
Sichuan Petchem Cracker 400 Dec, 1 month
1,100 1,000 Zhejiang Xingxing MTO 390 endDec-endJan
Tianjin Bohua PDH 600 3Jan, 1 month
1,000 800 JXTG RFCC 45 Feb, 1 month
900 GS Caltex RFCC 250 Mar-Apr, 40 days
600 Tosoh Cracker 260 1H Mar, 45 days
800
Showa Denko Cracker 385 10 Mar - 20Apr
700 400 Petronas PDH 300 Mar-Apr, 45 days
27 Oct 16 23 Mar 17 17 Aug 17 9 Jan 18 Haldia Cracker 340 Mar-Apr, 45 days
Pertamina ROPP 90 Apr, 12 days
Mitsubishi Chemicals Cracker+OCU 450 early May, 50 days
PDH cash margin, based on propane AFEI $/t
Keiyo Ethylene Cracker 335 mid-May - earlyJul
JXTG FCC 80 May-Jun, ~40days
L: Propane Argus Far East Index
R: PDH cash margins JXTG FCC 60 May-Jul, ~60days
650 400 JXTG FCC 60 May-Jul, ~60days

600
300 $574/t. Propane dehydrogenation margins fell by about $6/t to
550
$194/t.
500 200 Propylene production capacity losses inched up in January
to about 4.3pc compared with 4.1pc in December. They are
450
100 expected to fall in February to about 3.5pc.
400

350 0
Propylene
27 Oct 16 23 Mar 17 17 Aug 17 9 Jan 18 The following deals were done in the past week:
„„ $1,048/t cfr China main port, 2H January arrival cargo, 1
lot
Upstream and cracker margins „„ $1,060/t cfr China non main port, 2H January arrival cargo,
Naphtha cracker margins rose by about $66/t to $666/t as 1 lot
increases in ethylene prices were met with weaker naphtha „„ $1,018-1,025/t fob Taiwan, 10,000t January-loading cargoes
prices. Propane cracking margins increased by about $87/t to Northeast Asian propylene prices continued firming. Firm

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Argus Propylene and Derivatives Issue 18-2 Wednesday 10 January 2018

Asia-Pacific

pre-lunar new year holiday demand, a higher polypropylene Asia-Pacific prices $/t
Timing Low High Mid ±
(PP) market and firm derivative margins have all supported
propylene prices. Propylene
Buying ideas for imports rose to $1,040-1,050/t cfr China Poly grade SE Asia cfr spot 930 940 935 +15
against selling ideas not below $1,060/t. A rapid apprecia- Poly grade SE Asia fob spot 970 980 975 +15

tion of the Chinese yuan against the US dollar from Yn6.60 to Poly grade NE Asia cfr spot 1,040 1,060 1,050 +10

Yn6.50 in the past month also helped boost cfr China prices. Poly grade NE Asia fob spot 1,020 1,025 1,022 +23

2018 term contracts were largely settled as of the week in Polypropylene

Raffia cfr China 4 Jan 1,140 1,160 1,150 +10.00
the range of high $20/t to mid-$30/t premiums, about $10/t
Copolymer cfr China 4 Jan 1,150 1,170 1,160 0.00
higher than 2017 that mainly reflect higher freight costs. South
Acrylonitrile
Korea will largely maintain its contract volumes for 2018, only
China cfr spot 1,750 1,800 1,775 +25.00
S-Oil is able to sell 10,000t/month starting from the third
Propylene oxide
quarter of 2018 following the start-up of its new refinery
del east China Yn/t 13,000 14,000 13,500 -300
project.
del east China 1,619 1,743 1,681 -38
Taiwan will still have some supply length in February. The
month-long turnaround at Formosa’s 280,000 t/yr acrylonitrile Asia-Pacific contract pricing
(ACN) unit from mid-January will free up 25,000t of propylene $/t €/t

in total, with 10,000t already sold. CPC is looking to restart its
No.4 cracker on 19 January after a turnaround that started on
16 November.
South Korea has supplies for February as well in the ab-
sence of plant shutdowns. But most sellers have yet to offer
their February cargoes this week on expectation of higher
prices because of pre-holiday purchasing from Chinese buyers
in advance of lunar new year.
Chinese domestic prices edged up again on the back of
firm demand from derivative markets, particularly PP. ACN has
also rebounded after hitting a four-month low at the end of
the year. There are falls in other derivatives including phenol,
acrylic acid and propylene oxide but their margins were firm.
Transaction prices rose to Yn8,100-8,200/t ex-tank in
east China, or $1,032-1,045/t on an import parity basis, and
Yn8,300-8,350/t ex-tank Shandong that was $1,058-1,064/t on
an import parity basis. North China prices were higher because
of a tighter balance. Tianjin Bohua’s propane dehydrogenation
(PDH) unit is currently down for a turnaround from 3 January
for a month. The week’s average Chinese PDH run rate was
unchanged at 83pc.
Propylene prices in southeast Asia rose along with north-
east Asian values. No bids or offers emerged, with Malaysia
possibly needing to import refrigerated propylene in March or
April. Lotte Titan has boosted productions at its new catalytic
cracking unit. The market is still valuing cfr southeast Asia at
about a $120/t discount to cfr northeast Asia prices.
Poly grade Taiwan
Nov 910 757
Oct 895 755
Sep 880 745
The spot market in southeast Asia has lost liquidity in
recent months, resulting in a peculiar trend in reported prices.
Significant oversupply in the region -- driven by high cracker
and refinery rates based on good margins for co-products eth-
ylene and gasoline -- has enabled more direct deals. And with
increasing freight rates, differentials from northeast Asia have
become the common reference for most deals. Argus will con-
tinue to report the southeast Asia price but has removed the
data from the global chart as its relevance to global dynamics
is no longer valid.
Polypropylene (PP)
The domestic Chinese PP market remained on an upwards
trend after the new year holiday. Import and domestic prices
are increasing along with firmer PP futures. Lower inventories
also supported prices.
The combined PP and polyethylene inventories at ma-
jor producers remained at a lower level of 650,000t. Major
producers have raised ex-warehouse offer this week. Prices
in China domestic market firmed with raffia prices trading at
Yn9,300-9,500/t ex-warehouse in east China, or $1,110-1,134/t

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Argus Propylene and Derivatives Issue 18-2 Wednesday 10 January 2018

Asia-Pacific
PP homopolymer non-integrated margin $/t
yr unit this week. Shenhua’s coal-to-oil complex restarted and
L: PP R: PP homo cash margin its downstream 600,000 t/yr PP unit has maintained run rates
1,200 150 at 60pc since the end of last year.
PP demand remained steady. Buyers returned to the mar-
1,150 100 ket for replenishment. But buying interest will start to weaken
from early February since converters typically shut plants
1,100 50
before the lunar new year in mid-February.

1,050 0
Propylene oxide (PO)
China’s PO prices corrected lower after hitting a multi-year
1,000 -50
high level at Yn14,000-14,100/t delivered in east China. Spot
950 -100
transactions slid to Yn13,000-13,400/t delivered in east China
20 Oct 16 16 Mar 17 10 Aug 17 4 Jan 18 towards the close of the assessment week on 10 January. Pro-
ducers were undercutting each other’s prices in a bid to sell
more cargoes than others to lock in higher profits.
Inventory from Sinopec, PetroChina vs PP prices
Major downstream flexible foam makers were showing a
stronger resistance to hefty feedstock prices, including PO and
Inventory(left) Domestic PP prices(right)
toluene di-isocyanate, as the significant cost increases were
1,200 9,830
unable to be passed on to derivatives. PO prices have been
1,000 9,275 on an uptrend since late November 2017 with an accumulated
800 8,720 26pc hike. Cold and snowy weather in north China hampered
’000t

road transportation and cut demand for polyether products.

Yn/t

600 8,165
Chinese PO plant operating rates were estimated at 70pc
400 7,610 compared with 74pc in mid-December. Jilin Shenhua’s 300,000
200 7,055 t/yr unit remained idle without a specific restarting date.
0 6,500 Chlorohydrin-based PO producers in Shandong and Tianjin con-
May 16 Sep 16 Jan 17 May 17 Sep 17 Jan 18 tinued restricting operations with average run rates at 70-75pc
amid pollution controls.
on an import parity basis. Copolymers traded at Yn9,500- The estimated margins of non-integrated Chinese PO mak-
9,700/t ex-warehouse in east China.
PO non-integrated margins Yn/t
India-origin cargoes were trading at $1,160-1,170/t cfr
China. Middle East supplies were offered at $1,170-1,180/t. L: PO east China delivered
Supplies of imported homopolymers remained tight and prices R: PO cash margin
14,000 5,000
firmed to $1,150-1,170/t cfr China. Copolymer prices were
unchanged at $1,150-1,170/t, trading the same level with 13,000 4,000
homopolymers. The gap was nearly $100/t in February of last
year. Import PP producers have reduced their volume to China. 12,000 3,000
This will be a continued trend, since they found it difficult to
compete against lower cost polymers derived from coal. 11,000 2,000
Domestic supplies were at balanced to tight. Hainan Refin-
10,000 1,000
ery has delayed restarting its 200,000 t/yr PP unit to 18 Janu-
ary from the earlier plan of December. SinoChem Quanzhou’s
9,000 0
200,000 t/yr unit is also down for maintenance since 3 Decem- 26 Oct 16 22 Mar 17 16 Aug 17 10 Jan 18
ber until 16 January. Datang is trying to restart its 460,000 t/

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Argus Propylene and Derivatives Issue 18-2 Wednesday 10 January 2018

Asia-Pacific

ers reached as high as $620/t at the start of 2018 before falling Downstream outages
slightly to $570/t this week. The PO industry has enjoyed Shutdown Plant KTA Duration

higher profits throughout 2017 amid a tight balance as a result Sinopec Qilu ACN 80 earlyJul, unspecified
of pollution control-caused production curbs. The average Shandong Haili ACN 130 Trial runs delayed to 1Q 18
margins were about $260/t in 2017, $100/t higher than 2016.
Formosa Mailiao ACN 280 midJan, 1 month

Shanghai Secco ACN 520 9Jan, 10 days

Acrylonitrile (ACN)
Changzhou Fund PP 300 endJun, unspecified
The ACN market rebounded at the start of the new year,
Japan Polypropylene PP 300 lateSept, 6 montsh
ending a downwards trek from mid-October to the end of
2017. The market balance adjusted to tighter again following Datang International PP 460 16Nov17-mid-Jan

restocking demand and production losses from plant mainte- Sinochem Quanzhou PP 200 3Dec-16Jan18

nance. But potential upsides may be limited, particularly in Hainan Refinery PP 200 20Nov17-18Jan
the China domestic market, as the major downstream acrylic Vietnam Nghi Son PP 370 Start up Mar 18
fiber sector still shows losses. Korea Kumho 3 plants Ph/Ac 680/410 earlyNov-earlyDec
Chinese producers raised offers to Yn13,500-13,800/t ex- Shandong Lihuayi Ph/Ac 220/135 10Jan, 5-7 days
tank in east China towards the close of the assessment week, Jilin Shenhua PO 300 earlyOct, unspecified
with deals done at Yn13,500-13,700/t ex-tank. These were a
rise of Yn300/t rise from late December. The current prices
were equivalent to $1,710-1,735/t on an import parity basis. Phenol/acetone
Secco has reduced the operating rate at its 520,000 t/yr Phenol prices in China fell amid slower demand. Producers of-
plant to 80pc for minor maintenance, which will last for about fered price discounts to trigger buying interest. While demand
10 days. The week’s average Chinese ACN operating rate as a from the downstream bisphenol sector remained steady, phe-
result dropped to 89pc from a previous 94pc. Shandong Haili nolic resins were seeing some softness.
has further delayed the start-up of its new 130,000 t/yr unit to Spot trades were done at Yn10,200-10,300/t ex-tank in
February-March, pending government approval. east China towards the end of the assessment week, down by
Taiwan’s Formosa will have a month-long turnaround at its Yn200/t from the previous week. Discussions on a cfr China
280,000 t/yr unit from mid-January, tightening regional sup- price basis also trended downwards to a mid-$1,300s/t cfr
plies. Offers for imports were lifted to $1,800-1,850/t cfr China China level from a previous high of $1,300/t, tracking lower
against buying ideas at a low $1,700/t. No deals emerged. US domestic prices.
cargoes remained absent from the market. Supplies were comfortable in the China domestic mar-
Non-integrated Asian ACN margins remained firm at about ket. Except for planned maintenance at Shandong Lihuayi’s
$240/t, almost at parity to average margins of $250/t in 2017. 220,000/135,000 t/yr phenol/acetone unit on 10 January for

ACN non-integrated margin $/t China phenol/acetone plant operating rate %

Acrylonitrile margin (right) Acrylonitrile CFR China (left)

2,200 900 100%

1,930 85%
600

1,660 70%
300
1,390 55%

0 40%
1,120

850 -300 25%

Jan 16 Jul 16 Jan 17 Jul 17 Jan 18 Jul 16 Nov 16 Apr 17 Aug 17 Jan 18

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Argus Propylene and Derivatives Issue 18-2 Wednesday 10 January 2018

Asia-Pacific
Phenol non-integrated margins
about a week, the rest of the phenol/acetone units were run-
ning at a high rate about 85-95pc. The week’s average rate L: Acetone east China ex-tank
was 82pc compared with 88pc a month ago. L: Phenol east China ex-tank
Chinese standalone phenol/acetone producers’ margins R: Phenol/acetone cash margin
11,000 500
narrowed to $380/t again this week after widening to $400-
10,000 400
420/t in the previous three weeks. Phenol margins only
300
improved in the fourth quarter of 2017 with the year’s average 9,000
margins at zero. Other Asian non-integrated producers’ profits 200
8,000
were estimated at $270/t this week. 100
7,000
0
6,000 -100
5,000 -200
27 Oct 16 23 Mar 17 17 Aug 17 9 Jan 18

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