11 January 2012 17:46 [Source: ICIS news]
HOUSTON (ICIS)--US propylene contracts for January settled flat from December, market sources said on Wednesday, adding that the rollover indicates prices may have bottomed out after three consecutive monthly drops.
The settlement keeps polymer-grade propylene (PGP) at 56 cents/lb ($1,235/tonne, €963/tonne) and chemical-grade propylene (CGP) at 54.50 cents/lb.
The rollover follows a sharp downtrend in the fourth-quarter of 2011, when propylene contracts fell by nearly 30% on weaker demand and ample supply, particularly of refinery-grade propylene (RGP).
US propylene contracts had also been expected to fall in January, pressured by softer spot prices through most of December, but an increase in energy prices since the holidays, followed by higher RGP prices, has lent renewed support to the monomer.
RGP for January was bid on Wednesday at 41.50 cents/lb, up from a deal done at 38.50 cents/lb in the last week of December. First-quarter material was offered at 49 cents/lb.
The increase in the RGP price stems from firmer alkylation values, which have risen on the back of higher gasoline prices.
Alkylation values tend to influence the price of propylene because refiners can use RGP as an alkylate in gasoline or sell it as a feedstock to the chemical industry, depending on which side is paying more for the product.
RGP accounts for around 60% of the US propylene market.
PGP spot prices also recovered ground in the first week of January. The product traded last week at 54.50 and 56.00 cents/lb, up from 54.00 cents/lb in late December.
Market conditions point to continued support for propylene in February, as supply may be constrained because of planned cracker maintenance in the US.
The new year began with one unit being shut down, the first of possibly three crackers that could go off line over the next few weeks.
Renewed strength in the upstream energy complex, if continued, is also supportive of higher monomer prices.
"My gut feeling is [an increase of] 2–4 cents/lb," a market participant said. Another source predicted an 8–10 cent/lb jump, citing continued gains in alkylation values.
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.
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