01 April 2011 19:44 [Source: ICIS news]
HOUSTON (ICIS)--A major US polypropylene (PP) producer nominated a 10 cent/lb increase for April contracts, aiming to keep pace with a potential increase in propylene monomer prices, sources said on Friday.
The 10 cent/lb ($220/tonne, €154/tonne) increase nomination was at odds with another producer’s announcement to raise April prices by 2 cents/lb in addition to the monomer price increase.
“Propylene costs are increasing along with increased freight surcharges, increased energy costs to operate our plants and increased working capital to run our business,” the second producer said in a letter to customers.
Most US domestic PP contracts are linked to polymer grade propylene (PGP) benchmarks, and PGP has been nominated up 10-11 cents/lb for April.
In mid March, resin buyers and sellers forecast April PGP and PP to increase by 5-8 cents/lb, but tighter propylene supplies have caused expectations to firm.
A PP producer said the shutdown of an Enterprise splitter was contributing to the propylene shortage. Splitters convert refinery grade propylene (RGP) into PGP.
PP demand will weaken with the higher prices in April, but unlike previous price spikes, the market could stabilise at the higher levels, a trader said.
“I think the PP producers got caught in October and they got caught in February thinking people would continue to buy,” the source said. “Now they won’t make it if they don’t have the sales.”
In a letter to customers, a PP producer said it will strictly enforce the policy of having orders confirmed by a deadline in the first half of the month and will consider those orders “firm and mutually binding”.
Such policies have been in place for about a year, another producer said.
The lead time policies allow producers to minimise PP output when monomer prices are high.
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 = €0.70)
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