US propylene contract prices poised for June plunge

21 May 2010 19:39  [Source: ICIS news]

HOUSTON (ICIS news)--US propylene contract prices are likely to settle lower in June, but the amount of the decrease remains a moving target, monomer and polypropylene (PP) market participants said on Friday.

Most downstream market sentiment was focused in the minus 8-10 cents/lb ($176-220/tonne, €141-176/tonne) range for June monomer contract pricing.

Propylene producers, meanwhile “are looking at 4-5 cents/lb down,... trying to keep any kind of spread,” a source said.

PP market participants forecast a bigger drop based on expected narrowing of the spread between polymer-grade propylene (PGP) and refinery-grade propylene (RGP).

US PP demand had weakened as domestic buyers purchased hand-to-mouth in anticipation of the June price drop. Also, falling crude oil prices curbed export opportunities to major markets in Europe and Asia.

A PP market source noted that the May PGP contract price at 63.5 cents/lb was 18-19 cents/lb above the most recent RGP spot deals, so an 8-12 cent decrease for June would bring prices close to the historical spread of 6-7 cents/lb.

The spread between RGP and PGP prices widened to more than 30 cents/lb at the end of April, before May PGP contracts fell by 12 cents/lb.

A supply bottleneck at the splitter units that upgrade RGP to PGP was cited as the cause of the wider spread.

RGP from refineries has grown in importance as a PGP source because US Gulf ethylene plants have increasingly used ethane as a feedstock, which generates less by-product propylene.

Also, a series of planned and unplanned cracker outages in the past several months reduced the supply of co-product PGP and chemical-grade propylene (CGP) and helped to drive up prices.

Chevron Phillips Chemical, Enterprise Products, ExxonMobil, LyondellBasell and Shell Chemical were among the major US producers of PGP and CGP.

Dow Chemical, INEOS, Ascend Performance Materials and Total were among the main buyers.

($1 = €0.80)

For more on propylene visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect

By: David Barry
+1 713 525 2653

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly