19 May 2011 23:51 [Source: ICIS news]
HOUSTON (ICIS)--Spot offers for prime polypropylene (PP) homopolymer have emerged more than 10 cents/lb ($220/tonne, €154/tonne) below May contract prices, suggesting that weak demand will cause propylene and PP contracts to settle lower in June, buyers said on Thursday.
Prime injection and raffia grade PP was offered by several producers in the high 80s and low 90s cents/lb DEL (delivered), sources said.
By comparison, formula-based contract prices for May settled up by 9.5 cents/lb, reaching the mid-to-upper 100s cents/lb DEL.
Most of the US PP market has monomer-plus contract pricing based on a monthly polymer grade propylene (PGP) benchmark.
As a result of feedstock propylene shortages, PP costs have been forced higher without the support of strong demand.
Market participants view the May PP contract prices as unsustainable, and some predict a 10-15 cent/lb correction in June.
“This will not impact this month’s settlement, but I believe it will cause a steep decrease in June,” a PP market source said.
The low spot offers indicate that producers feel pressure to move inventory, after many converters cancelled orders in May, sources said.
However, current refinery grade propylene (RGP) spot prices indicate a less dramatic fall of about 7 cents/lb in June polymer grade propylene (PGP) contract settlements, a resin seller said.
RGP was recently offered at 84 cents/lb in May, down from deals done at 90.75-91.00 cents/lb at the end of April.
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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