FOB Korea propylene 2026 term contracts' discounts narrow ahead of steam cracker rationalization

The discount of FOB Korea propylene cargoes with CFR Northeast Asia has shrunk by up to $5-$10/metric ton year over year for 2026 term contracts, producers and traders active in the market said Jan. 6-7, meaning term contract prices were firming in 2026.

The main reason for the diminishing discount is the widely expected reduction in propylene supply because of South Korea's initiative to rationalize the country's naphtha-fed steam cracker capacity by 2.7 million-3.7 million mt/year, or 20%-28% of the present capacity.

"All Korean NCC companies have submitted their initiatives, but no details have been revealed," said a South Korean producer Jan. 7, adding that it was expected that up to four units would be shut following the rationalization.

The producer also confirmed that propylene term contract alphas had "significantly increased, ranging from $5/mt to $10/mt," compared to the term contract levels in 2025.

A China-based trader said the 2025 term contract discount to CFR Northeast Asia prices published by ICIS was settled mostly at about $35/mt, but with some variations based on the individual companies. The CP has increased by $5-$10/mt compared to 2025 levels as there would be "less cargo in 2026," he added.

South Korea's propylene capacity is estimated to be about 10 million mt/year, with naphtha-fed steam crackers in Ulsan, Daesan and Yeosu, as well as other production units.

Some capacity has already been idled, such as Yeochun NCC's No. 3 naphtha-fed steam cracker, which was shut Aug. 8, 2025, amid negative margins, Platts, part of S&P Global Energy, reported previously. The unit, which could produce 500,000 mt/year of ethylene and 240,000 mt/year of propylene, remains shut at the time of publishing.

Platts assessed spot propylene at $711/mt FOB Korea and at $741/mt CFR China Jan. 6, both markers up $1/mt day over day.