US propylene producers seek 15% increase for April

25 March 2011 20:09  [Source: ICIS news]

US propylene producers propose 15% hikesHOUSTON (ICIS)--US propylene producers announced proposed increases of 10 cents/lb ($220/tonne, €156/tonne) and 11 cents/lb for April, market sources said on Friday, citing tight supply and firm demand as the drivers behind the initiatives.

The nominations represent an increase of around 15% from March, when polymer-grade propylene (PGP) settled at 72.50 cents/lb and chemical-grade propylene (CGP) at 71.00 cents/lb.

US producers were expected to push for an increase next month, following a jump in propylene spot prices in recent weeks.

Refinery-grade propylene (RGP) for March traded on Wednesday at 72.50 cents/lb, up from 60.00-62.00 cents/lb four weeks earlier, while PGP spot prices gained 7.50 cents/lb in the same period.

Propylene spot prices rose on the back of rising energy values, including a 30 cent/gal spike in the price of gasoline and an 8% increase in crude oil prices.

The increase in gasoline prices pushed alkylation values up, lending more support for RGP, a supplier said.

Alkylation values were assessed at 64.3 cents/lb on Friday, up from 56.2 cents/lb on 25 February.

Refiners can use RGP as an alkylate in gasoline or sell it as a feedstock to the chemical industry, depending on which market is paying more for the product.

Market sources also pointed to constrained supply and firmer propylene demand as a factor behind the proposed increases.

Propylene demand is picking up both in the domestic and derivative export markets, sources said, citing increased consumption in key downstream polypropylene (PP) market.

“PP demand began perking up when buyers realised March was a low point,” a market participant said.

PP accounted for around 56% of US propylene demand in 2010, according to industry figures.

The proposed increases for April were announced by two producers. A third supplier was also expected to nominate this week, but information on the initiative was not immediately available.

US buyers had predicted propylene contracts would go up in April, but consumers were forecasting a smaller increase of 6.00-7.00 cents/lb next month.

US propylene contracts usually settle at the beginning of the month being negotiated.

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.

For more on propylene visit ICIS chemical intelligence

By: William Lemos
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