16 August 2012 21:38 [Source: ICIS news]
HOUSTON (ICIS)--US polypropylene (PP) contracts settled down by 1.50 cents/lb in August following a similar decrease for feedstock propylene, despite efforts by some producers to boost their margins by 1 cent/lb, sources said on Thursday.
US PP contract prices for August were at 61.50-63.50 cents/lb ($1,356-1,400/tonne, €1,098-1,134/tonne) DEL (delivered) for homopolymer injection and raffia grade material, as assessed by ICIS.
Much of the PP market has a monomer-based contract that follows the monthly polymer grade propylene (PGP) cost. PGP prices fell to 50.50 cents/lb for August.
Some producers had issued notices to customers informing them they would improve their margins by 1 cent/lb, which would have resulted in a net decrease of 0.5 cent/lb for the month. However, buyers and other market participants said the move was unsuccessful for contract buyers.
"There is no disconnect from monomer in contract pricing," said one source. "There is too much tied to those numbers. It will be difficult to put a pry bar between those two."
However, while PP contract prices fell, spot prices were rising, and were in some cases 3-4 cents/lb above contract prices, sources said.
One producer said it is unusual to have spot prices increase while contract prices fall, but agreed the situation is occurring.
The increase in spot prices has been attributed to tight supply caused by producers limiting production rates to meet only forecasted orders, sources said.
Major North American PP producers include LyondellBasell, ExxonMobil, INEOS, Total, Formosa Plastics, Braskem Americas, Pinnacle Polymers, Phillips 66 and Flint Hills Resources.
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