Falling US propylene prices to squeeze downstream margins: Dow

25 April 2013 22:40  [Source: ICIS news]

HOUSTON (ICIS)--Falling US propylene prices will likely squeeze margins for commodity derivatives of the monomer, the head of Dow Chemical said on Thursday.

During the first quarter, US chemical-grade propylene (CGP) contract prices rose from 71.5 cents/lb ($1,576/tonne, €1,214/tonne) in January to 77.5 cents/lb in February, according to ICIS. They fell back down to 71.5 cents/lb in March.

In April, CGP fell to 61 cents/lb.

When feedstock prices swing so rapidly, it makes it more difficult for producers to pass through earlier increases.

"Propylene moving around like it did in the quarter is not a good thing for more commodity-based propylene derivatives in terms of price power," said Andrew Liveris, Dow CEO. He made his comments during an earnings conference call.

Dow's coatings business is not as affected by propylene volatility as it used to be, Liveris said.

However, that is not the case for more commodity derivatives, such as slabstock polyols, used to make foam for bedding, he said. Those markets are already weak, and there will likely be margin squeeze in the face of falling propylene prices.

"It is going to be hard to maintain price momentum," Liveris said.

($1 = €0.77)

By: Al Greenwood
+1 713 525 2645

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