Petrologistics starts propylene production at Texas plant

22 October 2010 18:08  [Source: ICIS news]

Petrologistics starts propylene productionHOUSTON (ICIS)--Petrologistics launched production at its propylene plant in Texas, the company said on Friday, adding that the unit is expected to run at capacity within 30 days.

The 544,000 tonne/year plant in Houston will produce chemical- (CGP) and polymer-grade propylene (PGP) through propane dehydrogenation (PDH), the only facility of its kind in the US.

The unit was originally expected to come on stream at the end of July, but the start-up was postponed several times as a result of commissioning issues, Petrologistics had said.

“Sometimes it takes awhile for it to all work together at the same time,” one source said.

The delays generated anxiety in the US market, as buyers and sellers tried to calculate how the extra capacity would influence monomer prices in the short term.

“Now the fun begins,” said one source. Another market participant said the start-up was good news for US buyers, but added that the impact was yet to be determined.

Market sources expected the start-up would reduce the spread between refinery-grade propylene (RGP) and PGP, which was around 10.00 cents/lb ($220/tonne, €158/tonne), up from a historical average of 4.00-5.00 cents/lb.

RGP for October traded this week at 46.00 cents/lb, while PGP for October was offered earlier in the week at 55.25 cents/lb.

The gap between the two grades began to widen in the first quarter, soaring past 20.00 cents/lb thereafter, as demand for PGP was strong while splitter capacity in the US remained maxed out.

Splitters use RGP as a feedstock to produce PGP and CGP. RGP accounts for around 60% of the US propylene market.

The outlook for US propylene in November could weaken further with the start-up of Petrologistics, as PGP spot prices - which have softened in recent weeks - will probably continue to fall, according to sources.

US PGP contracts in October settled at 58.50 cents/lb, down by 1.50 cents/lb from September, while CGP contracts fell to 57.00 cents/lb, also a 1.50 cent/lb drop.

Market participants predicted contracts could fall by 2.00-4.00 cents/lb for November.

“If we use a PGP deal done early this week as an indication, it is in that range,” said a US buyer, referring to a November PGP spot transaction done on Monday at RGP plus 7.00 cents/lb, and a 2.50 premium between spot and contract prices.

US producers are expected to unveil nominations for November in the coming days.

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

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

($1 = €0.72)

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By: William Lemos
+1 713 525 2653

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