US February propylene settles flat after producer ends hold-out

16 February 2011 21:25  [Source: ICIS news]

A LyondellBasell facility in the USHOUSTON (ICIS)--US propylene contracts for February settled flat, market sources said on Wednesday, confirming that a hold-out producer had agreed to the rollover.

The settlement kept polymer grade propylene (PGP) at 77.50 cents/lb ($1,709/tonne, €1,265/tonne).

Two US producers had originally nominated increases of 3.00 cents/lb for PGP, but a drop in spot prices in the second half of January undermined the initiatives.

Spot PGP for February delivery traded at 75.00 cents/lb in the last week of January, down from 75.50 cents/lb two weeks earlier.

February PGP was offered on Wednesday at 73.00 cents/lb with no bids.

Chemical grade propylene (CGP) also settled flat at 74.00 cents/lb, despite two proposed increases of 5.00 cents/lb, but the market remained split because a third producer held its contracts at 70.00 cents/lb as part of a two-month settlement agreed upon in January.

The rollover for US propylene in February followed a significant increase in January, when PGP contracts rose by 17.00 cents/lb and CGP by 11.00 and 15.00 cents/lb.

The January surge stemmed from tight supply and higher spot prices, including a 42% spike in refinery grade propylene (RGP) prices in December.

RGP is a key element in determining propylene contract prices because the product is used as a feedstock for higher-purity propylene and accounts for around 60% of the US monomer market.

RGP for February traded at 62.00-65.00 cents/lb this week, down from deals done at 72.00-72.25 cents/lb in the first week of the month.

The drop resulted from weaker demand, a market participant said, indicating that the increase in propylene contracts in January had priced PGP out of the market.

The softening in RGP also pointed to a likely drop for propylene in March, including estimates that contracts could drop by around 10.00 cents/lb, a market source said.

Major US producers of PGP and CGP include Chevron Phillips Chemical, Enterprise Products, ExxonMobil, LyondellBasell, Petrologistics and Shell Chemical.

The main buyers include Dow Chemical, INEOS, Ascend Performance Materials and Total.

($1 = €0.74)

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By: William Lemos
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