18 January 2012 19:57 [Source: ICIS news]
HOUSTON (ICIS)--US refinery-grade propylene (RGP) traded sharply higher on Wednesday, lifted by recent gains in alkylation values, market sources said.
RGP for January-February traded at 52 cents/lb ($1,146/tonne, €905/tonne) for railcar delivery, up by 32% from a previous pipeline deal done at 39.50 cents/lb in the first week of January.
January RGP was bid at 48 cents/lb (pipeline) on Wednesday with no offers.
The increase in the price of RGP stems from higher alkylation values, which rose to nearly 52 cents/lb last week, up from just under 40 cents/lb at the end of December, on the back of higher gasoline prices and lower iso-butane values.
Alkylation values tend to influence the price of propylene because refiners can use RGP to make alkylate in gasoline or sell it as a feedstock to the chemical industry, depending on which side is paying more for the product.
RGP inventories remained at record highs last week, but the latest jump in the price of the product, which accounts for 60% of the US propylene market, will lend further support to an expected increase in polymer-grade propylene (PGP) contracts next month.
PGP for January was offered on Tuesday at 59 cents/lb with no bids. First-quarter PGP was offered at 62 cents/lb, also without bids. The monomer traded at 54.50-56.00 cents/lb in the first week of January.
US PGP contracts for January settled flat last week at 56 cents/lb.
Also lending support to propylene are expectations that cracker-sourced propylene supply could be constrained in the coming months as a result of a heavy turnaround schedule in the US olefins industry.
Renewed strength in the upstream energy complex, if continued, is also supportive of higher monomer prices.
Market sources predicted propylene price increases in February ranging from 2-4 cents/lb to as much as 10 cents/lb, citing recent gains in alkylation values and a potential increase in demand during the next few weeks.
US propylene contracts usually settle at the beginning of the month being negotiated.
($1 = €0.79)
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