16 May 2013 20:22 [Source: ICIS news]
HOUSTON (ICIS)--US May propylene contracts reached a full settlement at a slight decline, sources confirmed on Thursday.
Producers and buyers said US May polymer-grade propylene (PGP) and chemical-grade propylene (CGP) contracts fell by 1 cent/lb ($22/tonne, €17/tonne), matching earlier nominations.
This puts US PGP contracts at 62 cents/lb and US CGP contracts at 60.5 cents/lb.
At first, nominations for May propylene contracts came in at drops of 1 cent/lb and 3 cents/lb. However, the producer that nominated the larger decline quickly revised its nomination to a decline of 1 cent/lb.
The contract drop is in line with spot values for PGP, which averaged about 57.875 cents/lb since April contracts settled.
Spot PGP prices had been at 58.25-58.50 cents/lb before April contract settlements.
A trade of PGP on Tuesday at 61.25 cents/lb led to some speculation that prices were on an uptrend and that the May contract could settle at a rollover.
However, market sources said that was unlikely because of where prices had been for most of the month.
Typically, US propylene contracts are settled toward the start of the month for the rest of the month and are often completed at a 2-3 cent/lb premium to recent spot trades.
The May contract drop is the third in a row and puts US propylene contracts down by 17 cents/lb since they settled at a 2013 high of 79 cents/lb in February.
Still, US propylene contract prices are 4 cents/lb higher since the start of 2013.
US propylene buyers said that prices had surged too much in the first two months and were unsupported by demand and consumption levels.
As a result, buyers had retreated from the market, drawing down inventories and pushing spot prices lower.
With April contracts dropping 10 cents/lb, some buyers felt the bottom had been reached, while others said the bottom was lower.
As a result, demand in May has slightly improved, with some of the increase attributed to the need for buyers to restock inventories.
This has been seen in US propylene inventories, which have fallen by 7.8% in the past two weeks despite refinery operating rates increasing by 3.6 percentage points during that time.
Major US producers of CGP and PGP include Chevron Phillips Chemical, ExxonMobil, LyondellBasell, PetroLogistics and Shell Chemical.
Major buyers include Ascend Performance Materials, Dow Chemical, INEOS and Total.
($1 = €0.78)
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