US PP producers seek better margins amid snug supply

05 August 2010 21:03  [Source: ICIS news]

PP producers seek better marginHOUSTON (ICIS)--Rising feedstock costs are expected to add 2 cents/lb ($44/tonne, €33/tonne) to polypropylene (PP) contract prices in August, and resin producers are pushing additional increases to boost margins, market sources said on Thursday.

Despite higher PP spot prices, the outcome of the margin expansion initiatives was uncertain because fundamental demand has not improved significantly, according to some sources.

“PP could be a little tight,” a buyer said. “There is not really stronger demand in PP.”

Several August PP price increase nominations were heard at 4-5 cents/lb in the past week.

Other producers said they would seek to hike PP contracts by 2 cents/lb in addition to any feedstock polymer-grade propylene (PGP) increases.

Initial settlements for August PGP were 2 cents/lb higher, which would bring those producers’ increase nominations to 4 cents/lb.

A seller agreed that baseline PP demand has been stable for the past six months, but said that apparent demand was stronger in July and August because of restocking.

Customers reduced inventories to low levels in June, anticipating another price drop in July, but the monomer market firmed at the very end of June and contract prices rolled over, the seller said.

Spot PP resin availability has tightened and spot prices for US domestic customers have increased by 5-8 cents/lb compared with early July, sources said.

Buyers and traders said the tighter supply was mainly due to maintenance problems and planned production cutbacks.

US PP homopolymer spot prices were heard at 63-67 cents/lb DEL (delivered) this week.

With August increases pending, ICIS-assessed domestic contract prices for small-volume buyers were at 66-70 cents/lb DEL.

Major US PP producers include INEOS, LyondellBasell, Dow Chemical, Phillips Sumika, Sunoco, Pinnacle, Formosa, Total, ConocoPhillips, ExxonMobil and Flint Hills Resources.

($1 = €0.76)

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By: David Barry
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