OREANDA-NEWS. On 29 April 2008 was announced, that scheduled and unscheduled suspension of domestic polypropylene units in Kapotnya, Ufa and Budennovsk sharply cut supply of PP to the market, and, as a consequence, caused an avalanche-like increase in prices by \\$250-300/mt (!), over the course of the recent fortnight, according to MRC’s data.

If the market has been oversaturated with feedstock since the beginning of the year (rollover stocks were at about 15-17 kt as of the beginning of April, according to our data), then now the situation has drastically changed. We would like to remind that on April 4 there was an explosion followed by inflammation of reaction substance at the polypropylene polymerization unit in Budennovsk. In spite of prompt localization of fire, the aftermath is reportedly so serious that the production can be resumed not earlier than November-December, this year. Enterprise’s officials stated that the affected reactor will undergo X-ray testing in the nearest future, and after fault conditions are determined they will announce a tender to repair it.

The shortage of feedstock in the market is being aggravated by scheduled maintenances at Moscow Refinery (Kapotnya) and Ufaorgsyntez (Ufa). There is information that Moscow Refinery’s stocks have already been sold out completely, and in spite of the fact that the resumption of production is scheduled for May 1, shipments to the domestic market will start not earlier than the second half of May.  

Small volumes of Moscow Refinery’s 1025 Homo brand were offered in Moscow at RUB52.000–53.000/mt (\\$2.217-2.260/mt), including VAT, СРТ Moscow. Prices for 21030-16/Tomskneftechem and Balen01030/Ufaorgsyntez brands vary within the range of RUB51.500–52.500/mt (\\$2.195-2.240/mt), including VAT, СРТ Moscow. Nizhnekamskneftechem and Tomskneftechem are in more favorable conditions now because they operate normally. In March, Nizhnekamskneftechem even cut export down to 2 kt, and that allowed the enterprise to ship more than 14 kt of commercial PP to the domestic market. Tomskneftechem supplied about 9.85 kt to the domestic market.

One of the alternatives to relieve the tight market situation is to increase import. According to the preliminary data, the market may need about 12-15 kt of additional PP already in May, which is a good signal for importers (in March, they imported 7.9 kt, whereas in April, last year, before the launch of production units in Nizhnekamsk and Budennovsk, import of polypropylene moved at 14.2 kt). In our opinion, domestic processors will have to cut their stocks by nearly two times before new PP volumes are delivered.