US spot RGP trades up to 63 cents/lb amid plant outage

04 January 2013 21:33  [Source: ICIS news]

HOUSTON (ICIS)--US refinery-grade propylene (RGP) traded sharply higher on Friday, drawing support from a continued outage at an on-purpose propylene plant in Texas, market sources said.

Refinery-grade propylene (RGP) for January was transacted at 62.50 and 63.00 cents/lb ($1,389/tonne, €1,070/tonne) earlier in the day, up from 58.50 cents/lb on Wednesday.

The deals on Friday represent an increase of 28% from 49 cents/lb in the first week of December.

RGP prices are rising as demand for the product is strengthening as a result of an outage  at PetroLogistics’ propane dehydrogenation (PDH) plant in Houston, market sources said.

PetroLogistics took the facility down on 17 December for unscheduled repairs, saying it expects the outage to last around three weeks at a cost of approximately $2m.

The unexpected shutdown at the 544,000 tonne/year on-purpose unit has constrained the supply of polymer-grade propylene (PGP), which can also be produced as a co-product of ethylene at a steam cracker or through a splitter using RGP as a feedstock.

PGP for January delivery traded at 68.25 cents/lb on Friday, up from 55.250-58.000 cents/lb four weeks earlier.

US propylene producers have nominated increases of up to 23% for January but the initiatives, although steep, were announced before the latest jump in RGP and PGP prices.

The nominations include a proposed 13 cent/lb increase by a chemical-grade propylene (CGP) producer and an 11.50 cent/lb increase by a producer of both CGP and PGP.

US PGP contracts for December settled at 58 cents/lb, rising by 1 cent/lb, while CGP contracts were agreed at 56.50 cents/lb, also up by 1 cent/lb.

US propylene contracts usually settle at the beginning of the month being negotiated, but discussions may take longer in January as buyers will be in no hurry to settle until after PetroLogistics restarts its plant, a source said.

The restart could erode support for propylene spot prices and potentially give buyers some room to fight part of the increases proposed on the contract side.

($1 = €0.77)

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By: William Lemos
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