29 March 2010 22:12 [Source: ICIS news]
SAN ANTONIO, Texas (ICIS news)--The continuing and spectacular run-up in US propylene prices is perplexing retailers of end-use products because it has not been linked to any movement in crude oil values, a US acrylates buyer said on Monday.
Because oil prices have been relatively steady, downstream retailers were not fully aware of the cost pressures building from the jump in propylene, which has been driven higher in the US by supply issues.
"I don't think they realise how much inflation is coming," the buyer said on the sidelines of the National Petrochemical & Refiners Association (NPRA) meeting in San Antonio, Texas.
The retail segment of the market could understand the linkages when their suppliers had to pass on the costs of rising oil prices.
But in the current situation with propylene, "now they just don't get it", the source said.
US propylene supply has been tight since the start of the year, when an unusual deep freeze in Texas took many crackers offline.
The trend to lighter feedstocks in the US, to take advantage of the relatively low cost of natural gas compared with oil, has also been tightening propylene output.
A third factor has been the decline in US refinery operating rates due to limp demand for transport fuels and expanding use of ethanol in the gasoline pool.
Sources estimate that around two-thirds of US propylene now comes from refineries, due to declining output from crackers.
Spot prices for US Gulf refinery-grade propylene (RGP) were currently around 69 cents/lb ($1,521/tonne, €1,126/tonne), up 47% from the start of the year.
US propylene producers have nominated increases of 16-18% for April contracts.
The NPRA's International Petrochemical Conference (IPC) runs through Tuesday.
($1 = €0.74)
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