US PP demand improves as buyers position for April price hikes

24 March 2011 16:40  [Source: ICIS news]

A LyondellBasell facility in the HOUSTON (ICIS)--US polypropylene (PP) demand has improved in March, but the rebound may be temporary as spot prices rise and buyers build inventory ahead of likely April price hikes, sources said on Thursday.

“If demand is strengthening, it is because customers know April is going up, and it will come out of the April order book,” a producer said.

Buyers and sellers cited forecasts that feedstock propylene costs will rise by 5–10 cents/lb ($110–220/tonne, €78–156/tonne) in April, driving PP contract prices up by an equal amount.

Buyers are generally operating with low inventories, and some have been hesitant to purchase spot material at higher prices than contract, a trader said.

“I think a lot of people will get caught [with low inventories] in April,” the source said.

Spot prices for prime homopolymer were heard at 80–83 cents/lb FOB (free on board) USG (US Gulf) in railcar. Traders said these prices were not workable to any export markets.

Even wide spec homopolymer prices would need to be in the mid-70s cents/lb FOB range to export much volume, but offers were moving up to the high-70s cents/lb, traders said.

A producer said resin exports were becoming difficult to justify, given the high alternative value of propylene monomer.

Polymer-grade propylene (PGP) was most recently bid at 75 cents/lb.

The bulk of US PP contract business is conducted with formula pricing based on monomer contract settlements, and monomer contracts tend to settle in line with recent spot business.

Major North American PP producers include LyondellBasell, ExxonMobil, INEOS, Total, Formosa, Phillips Sumika, Braskem Americas, Pinnacle Polymers, ConocoPhillips, Flint Hills Resources and Dow Chemical.

($1 = €0.71)

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
For more on polypropylene visit ICIS chemical intelligence

By: David Barry
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