US propylene contracts for July settle flat, PGP at 52 cents/lb

06 July 2012 20:46  [Source: ICIS news]

HOUSTON (ICIS)--US propylene contracts for July settled flat with June, market sources said on Friday, on support from a small firming in spot prices last month.

The rollover keeps polymer-grade propylene (PGP) contracts at 52 cents/lb ($1,146/tonne, €928/tonne) and chemical-grade propylene (CGP) at 50.50 cents/lb.

US propylene producers had nominated a rollover and an increase of 3 cents/lb for July, but most sources had predicted a flat settlement.

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

The rollover comes after two consecutive monthly drops for the US contract, which fell by a combined 25.50 cents/lb in May and June, after rising by around 40% in the first quarter of the year.

The reduction in May and June, which put the monthly PGP contract at its lowest level since 49.50 cents/lb in November 2009, stemmed from weaker demand and looser supply.

Although the rollover for July could indicate that the US propylene market has bottomed out, spot prices showed new signs of weakness this week, a downturn that could lead to a reduction for contracts in August.

PGP for July delivery traded at 49 cents/lb this week, down from offers at 52 cents/lb a week earlier. August PGP was transacted early this week at 50 cents/lb and then at 47 cents/lb.

July PGP was offered on Friday at 47.50 cents/lb against a 44.00 cent/lb bid. August PGP was bid at 44.00 cents/lb with no offers.

No refinery-grade propylene (RGP) deals were heard this week. The product was heard offered at 38.50 cents/lb early in the week and later at 38 cents/lb. A bid for July was heard mid-week at 35 cents/lb.

The softening in spot prices this week was likely the result of renewed supply pressure, a market source said.

US propylene inventories showed significant gains in the last week of June, rising by 11% from a week earlier despite a small drop in operating rates at US refineries, government data showed.

Propylene inventories were at 4.147m bbl in the week that ended on 29 June, up from 3.735m bbl a week earlier, according to the latest data from the Energy Information Administration (EIA).

US refineries operated at 92.0% of capacity that week, down from 92.6% a week earlier.

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 = €0.81)

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By: William Lemos
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