04 March 2010 17:36 [Source: ICIS news]
HOUSTON (ICIS news)--US propylene contracts for March began to settle at an increase of 5 cents/lb ($110/tonne or €80/tonne), market sources said on Thursday, pointing to tight supply as the main factor behind the 8% jump from February.
The initial settlements put polymer-grade propylene (PGP) contracts at 68.50 cents/lb and chemical-grade propylene (CGP) at 67.00 cents/lb, according to global chemical market intelligence service ICIS pricing.
The expected increase matched proposed increases of 5.00 cents/lb put forward by three US producers, placing PGP just slightly above the high end of the latest deals seen in the spot market.
PGP for March traded last week at 63.50 and 66.00 cents/lb, but bids were heard on Thursday upwards of 67.00 cents/lb with no offers.
Unlike previous months, when refinery-grade propylene (RGP) was usually cited as the force driving up contracts, the increase in March seems to stem mostly from tight supply in the higher-purity monomer market itself.
Spot RGP was heard bid this week at 54.75 cents/lb, which is within deals done at 54.25-55.00 cents/lb in the first week of February.
By comparison, PGP traded in the first week of February at 66.25 cents/lb, rising by 8.6% from a deal done at 61.00 cents/lb in the last week of January.
Market participants have attributed tightness in PGP supply to curtailed splitter capacity, referring to the process through which RGP is upgraded to PGP.
“There is plenty of RGP but from what I understand splitter capacity is maxed,” a market participant said earlier this week.
At least four US crackers in Louisiana and Texas are currently heard to be off line.
The increase for propylene in March will extend an uptrend that began in November 2009, when contracts started to climb on the back of firm demand and tight RGP supply.
US propylene contracts will have risen by nearly 40% from November, including the expected 5.00 cent/lb jump in March.
Chevron Phillips Chemical, Enterprise Products, ExxonMobil, LyondellBasell and Shell Chemical are among the major US producers of PGP and CGP.
Dow Chemical, INEOS, Ascend Performance Materials and Total are among the main buyers.
($1 = €0.73)
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