Abstract:

　　Asian PP markets have been witnessing a downward trend since the first half of May mainly based on noticeable losses in crude oil bearish sentiment on the buyers' side, as well as plunging PP production costs. According to ChemOrbis Price Indexes, import homo-PP prices came down by $130-185/ton in China and by $140-150/ton in Southeast Asia since then.

　　Recently, upstream prices have rebounded slightly, with spot propylene prices in Asia rising by $15/ton and naphtha by $11/ton compared to the beginning of June. Fluctuating up and down over the course of June, crude oil prices also gained $2.54/barrel within the same period, settling at $75.12/barrel early this week as opposed to the level of $72.58/barrel, which was reported at the start of the month.

　　Although feedstock prices regained some of last month's large losses in Asia, the slight rebound in the upstream chain has not affected the PP market as the break even levels for PP production costs based on spot propylene are still below the regional producers' homo-PP offers. Indeed, PP players in China and Southeast Asia expect the current downward pressure to persist for a while more as poor demand conditions, as well as the upcoming new capacities are set to exert renewed downward pressure on homo-PP prices in the region.

　　Additional availability from several new capacities in Asia, India and the Middle East may become a factor, leading to further weakening in the PP sentiment. Additional supply expected from Asia includes China's Sinopec Tianjin Co., which already launched commercial production in May from their 450,000 tons/year PP plant and Sinopec Zhenhai Refining & Chemical Company, which saw on-spec production at its new 1 mil tons/year cracker on June 12, which supports a new 300,000 tons/year PP plant in China. In addition, HMC Polymers will start up its 300,000 tons/year PP plant in Thailand in July, while Siam Cement Group (Thai Polypropylene Co-TPP) raised the operating rates at their new PP plant with 400,000 tons/year capacity to 90% in June. PetroVietnam, which is preparing to start up its 150,000 tons/year PP plant in Vietnam, is also scheduled to be on the scene soon, as the company is expected to start trial runs in July.

　　Further supplies which will be coming during this time period include India's IOC, which is expected to raise the operating rates of its new 600,000 tons/year PP plant to 80% around mid-June and Borouge, which is expected to start up its new PP plant with 800,000 tons/year capacity officially in June/July, while the company is scheduled to start commercial operations in August or September.

　　The effects of all these new capacities are taking their toll on Asian PP markets, dampening buying interest, which was already limited over the past week as most buyers continued to wait on the sidelines in anticipation of further price reductions in the days ahead.