Petrotahlil - Views on April supply availability for spot propylene in Europe were mixed this week, with market participants assessing the impact of the coronavirus pandemic and the recent drop in crude oil on supply and demand fundamentals.
The implementation of stricter measure to contain the spread of the coronavirus pandemic has particularly hit demand from the automotive industry as producers shut down factories or slow production across Europe.
"Consumer demand will be hit hard; no one wants to buy a car, salaries will be affected," a downstream producer said.
As a result, while demand from packaging and hygiene applications was growing, sources expected demand from the automotive sector to slow in April, affecting order intake from polypropylene and oxo-alcohols producers and potentially turning propylene supplies long in Europe.
However, there was also growing uncertainty about the future of steam cracker operations.
The CIF NWE naphtha average price so far in March was $302/mt, down $163/mt from the February average, S&P Global Platts data showed, following recent crude oil price declines.
Cheaper feedstock costs have led to higher margins for olefins producers, but sources said it might become hard to sell spot volumes.
Platts calculated NWE spot cracker margins at around Eur713/mt Thursday, up 82% since the beginning of March.
"How can you convince a buyer to buy?" a source said previously, adding that even if sellers wanted to take advantage of healthy margins, underlying demand and logistical disruption remain a concern.
"It's a very mixed situation; it could go either way [for spot prices], small premium or small discount [to the April contract price]," a source said.
Spot deals for polymer-grade propylene were heard between a 4.5% discount and a 2.5% premium over the monthly contract price.
Platts last assessed PGP FD NWE at Eur726.50/mt, down from Eur782.50/mt a week ago.
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