US April propylene contracts rise 10%, but spot losing steam

06 April 2010 19:55  [Source: ICIS news]

US propylene rises 10%HOUSTON (ICIS news)--US propylene contracts for April settled on Tuesday at an increase of 7 cents/lb ($154/tonne or €114/tonne), but the jump came as spot values began to weaken, suggesting the monomer could reverse its uptrend next month.

The settlement puts April polymer-grade propylene (PGP) at 75.50 cents/lb and chemical-grade propylene (CGP) at 74.00 cents/lb.

The 10% jump was in line with projections, as some market participants had predicted a hike of 6-8 cents/lb, even though producers had nominated increases of 11 and 12 cents/lb.

April marked the sixth monthly increase for US propylene, the price of which has soared by 53% since November 2009, the month contracts began to climb on the back of tight supply.

However, a drop in spot prices so far in April seems to point to more stability in May or even a possible reversal in the latest uptrend, which has caused the US to have the most expensive propylene in the world.

Refinery-grade propylene (RGP) for April traded at 56.00 cents/lb on Monday, down from deals done at 58.00-58.75 cents/lb last week.

The softening in the key US feedstock for higher-grade propylene is due to increased supply, a producer said, citing higher refinery operating rates in recent weeks.

US refineries ran at 82.6% of capacity in the week ended 26 March, up from 81.1% in the previous week, according to the US Energy Information Administration (EIA).

PGP spot values have also weakened since the last week of March. A May PGP deal was heard done last week at 74.00 cents/lb, which is down from 76.00 cents/lb a week earlier.

Another factor that could weigh on US propylene in the coming months is the start-up by Petrologistics of a propane dehydrogenation (PDH) plant at the end of July.

The facility in Houston will produce CGP and PGP, adding some 1.2bn lb/year (544,000 tonne/year) of capacity to the market.

US propylene production in 2009 totalled 29.3bn lb, down by 10% from 32.6bn lb the previous year, according to data from the National Petrochemical & Refiners Association (NPRA).

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 = €0.74)

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By: William Lemos
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