US March propylene contracts settle up by 5 cents/lb

08 March 2012 19:42  [Source: ICIS news]

A US nickelHOUSTON (ICIS)--US propylene contracts for March settled at an increase of 5 cents/lb ($110/tonne, €84/tonne), market sources said on Thursday, rising by 7% from February but below nominations put forward for the month.

Two US producers had originally proposed increases of 7 and 15 cents/lb for March, although the latter figure never gained any traction, given spot price levels in the past two weeks.

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

The settlements for March put polymer-grade propylene (PGP) contracts at 77.50 cents/lb and chemical-grade propylene (CGP) contracts at 76 cents/lb.

Propylene prices are stronger this year than in 2011 and could top last year’s record of  97 cents/lb in May. Propylene contracts in March, 2011, were 72.50 cents/lb for PGP and 71 cents/lb for CGP.

The latest increase the second in as many months came as PGP spot prices in February climbed by 6%, while refinery-grade propylene (RGP) prices rose by nearly 8%

RGP traded at 68-69 cents/lb in the last week of February, up from 63-64 cents/lb in the first week of the month.

The increase in RGP stemmed from support in alkylation levels, which continued to rise in February, climbing on average by around 30% from the previous month.

Alkylation values can 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 pays more for the product.

RGP accounts for around 60% of US propylene supply, according to data from the American Fuel & Petrochemical Manufacturers (AFPM).

Also lending support to propylene in February were refinery turnarounds and a busy cracker maintenance season in the US so far this year.

Four US crackers were taken off line for planned maintenance in January and February, while a number of other units have scheduled stoppages over the next few months.

Around 10% of US ethylene capacity is expected to be down in the second quarter, according to a projection in the market.

BASF, INEOS, DuPont and Chevron Phillips Chemical have scheduled maintenance in the coming months.

Dow Chemical, ExxonMobil and LyondellBasell each have one cracker down at this time, while Shell Chemical had a three-week shutdown in January.

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.

($1 = €0.76)

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By: William Lemos
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