US propylene for May drops 12 cents/lb on spot price slump

07 May 2010 21:54  [Source: ICIS news]

HOUSTON (ICIS news)--US propylene contracts for May settled at a reduction of 12 cents/lb ($265/tonne, €209/tonne), pressured by a recent slump in spot prices, sources said on Friday.

The settlements put polymer-grade propylene (PGP) at 63.50 cents/lb and chemical-grade propylene (CGP) at 62.00 cents/lb, according to ICIS pricing.

Market participants attributed the drop to weaker demand and a sharp fall in the price of refinery grade propylene (RGP).

RGP, a co-product of gasoline, is a key component in the cost structure of US propylene, accounting for 60% of the US monomer market.

The product traded this week at 39.00-40.00 cents/lb, down from deals done at 58.00-58.75 cents/lb in the first week of April.

The reduction in May was the first for US propylene contracts since October 2009 and only the second contract drop in the last 17 months.

But some market participants said the downturn in propylene could be short lived as US crackers returned to lighter feeds and monomer output dropped in the coming months.

Light feedstocks were already on the rise in April, a consultant said, adding that crackers ran on 85% light feeds last month, up from 80% in March, driven largely by a jump in propane consumption.

One market participant attributed increased reliance on light feedstocks to a recent plunge in ethylene prices, saying cost-driven cracker operators were resuming a pattern of running mostly on ethane and propane.

“That will tighten propylene but the question is when it is going to happen,” the source said.

Another market participant predicted propylene prices would drop again in June, but the source said the market could rebound after that.

The outlook for the sector would also depend on how the start-up of a propane dehydrogenation (PDH) plant in Texas would affect the market.

The Petrologistics plant in Houston was scheduled to come on-stream in late July and would add some 544,000 tonnes/year of propylene capacity to the US market.

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 = €0.79)

For more on propylene, visit ICIS chemical intelligence
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By: William Lemos
+1 713 525 2653

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