Corrected: US propylene contracts for January settle 15 cents/lb higher

15 January 2013 18:06  [Source: ICIS news]

US propylene contracts for January settle 15 cents/lb higherCorrection: In the ICIS news story headlined "US propylene contracts for January settle 15 cents/lb higher" dated 15 January 2013, please read in the sixth paragraph …up 36% from 53.25 cents/lb in mid-November… instead of … up 36% from 53.25 cents/lb in mid-December….
A corrected story follows.

HOUSTON (ICIS)--US propylene contracts rose by 15 cents/lb ($331/tonne, €248/tonne) for January, lifted by a surge in spot prices in the past few weeks and strong demand, market sources said on Tuesday.

The 26% increase puts polymer-grade propylene (PGP) contracts at 73.00 cents/lb and chemical-grade propylene (CGP) contracts at 71.50 cents/lb.

A large increase for January had been expected after spot prices surged in the past few weeks on the back of plant outages, including an unexpected shutdown at PetroLogistics’ propane dehydrogenation (PDH) plant in Texas in December. The 544,000 tonne/year on-purpose propylene facility in Houston was restarted last week.

Several US crackers also have experienced unplanned shutdowns since December, providing additional momentum to the price of propylene, sources said.

US producers originally had nominated increases of 11.50 and 13.00 cents/lb for January, but one of the those suppliers later bumped the initiative to 15.00 cents/lb as spot prices continued to rise while negotiations got under way.

PGP for January traded on Monday at 72.25 cents/lb, up 36% from 53.25 cents/lb in mid-November, while refinery-grade propylene (RGP) traded at 69.00 cents/lb on Tuesday, rising by nearly 40% from deals done at 49.50-50.00 cents/lb four weeks earlier.

The surge in the price of RGP, which accounts for about 60% of the US propylene market, stems in part from tighter supply, which dropped to a 15-month low in the first week of January after inventories fell by 7% from a week earlier, according to data from the Energy Information Administration (EIA).

Market sources also cited stronger demand, saying PGP supply restrictions resulting from unplanned outages created additional demand for RGP as a feedstock for the higher-grade monomer.

PGP demand also strengthened on its own, sources said, adding that buyers flocked to the market in the second half of December once it became clear that a massive increase for propylene was in the pipeline for January.

With the January settlement completed, market attention quickly will shift to February, but sources said the outlook for next month is unclear, noting that it is too soon to tell how the January increase will affect demand.

Another source said trends in the US market would depend on how propylene prices behave in other regions.

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 = €0.75)

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By: William Lemos
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