May RGP, PGP gap narrows on stronger demand for gasoline

23 May 2013 20:51  [Source: ICIS news]

HOUSTON (ICIS)--US May refinery-grade propylene (RPG) spot prices started to narrow their gap to polymer-grade propylene (PGP) because of better demand, sources said on Thursday.

US May RGP spot prices moved to 54.5 cents/lb ($1,202/tonne, €938/tonne) on news of a deal done there, while May spot PGP prices fell to 60.5 cents/lb.

The 6 cent/lb gap between PGP and RGP is the narrowest it has been since early April, when it fell to 4 cents/lb.

Typically the gap is 8-10 cents/lb, sources said, owing to the higher purity of PGP and its higher consumption levels.

However, demand for PGP has dwindled in the second quarter because of high prices and a lacklustre construction market.

“Even with the gap narrowing, these guys are still making good money,” a market source said. “There’s no reason for them to worry.”

Meanwhile, US RGP demand is receiving a boost from use in gasoline production as the US summer driving season begins.

Market sources said the gap will likely be a short-term situation.

“Either PGP is being undervalued or RGP is being overvalued,” a producer said.

Supply of propylene is adequate, market players agreed, despite several major US crackers being down.

($1 = €0.78)

By: John Dietrich

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