Several US PP producers seek additional margin bump

02 July 2013 17:06  [Source: ICIS news]

HOUSTON (ICIS)--Several US polypropylene (PP) producers have announced an additional 2 cent/lb ($44/tonne, €34/tonne) margin bump for PP, on top of any change in propylene pricing, effective in either July or August, sources said on Tuesday.

Much of the PP market has a monomer-based contract that follows the monthly polymer-grade propylene (PGP) cost. In recent years, there has been a set margin for PP, with PP prices changing according to any fluctuation in the price of PGP. These announcements represent efforts by the companies to increase the base margin for PP.

INEOS announced an increase of 2 cents/lb over and above the change in the price of feedstock PGP between June and July, according to a copy of a 27 June customer letter obtained by ICIS.

"For example, if the final settled polymer grade propylene price increases by $0.01 per pound in July, then the total July polypropylene price increase will be $0.03 per pound above the June price," the letter states.

Total Petrochemicals and LyondellBasell are seeking the additional 2 cent/lb increase in August, instead of July, according to a 28 June letter from LyondellBasell and a 1 July letter from Total obtained by ICIS.

Pinnacle Polymers announced a similar 2 cent/lb increase effective for June contracts. It was not clear what happened with those efforts.

Some producers, such as Formosa Plastics, announced at the beginning of the year that they would move away from monomer-plus contracts and move to PP pricing. So far this year, Formosa's PP pricing has continued to follow the propylene market.

However, in a 28 June customer letter, Formosa Plastics announced it will increase the price of all PP by 3 cents/lb effective on 1 July. That would represent an additional 2 cent/lb increase over the existing 1 cent/lb price increase nomination for July PGP contracts.

Some sources have said the proposed increases have a chance of being implemented, based on existing tight supply in the market.

If successful, it would be the second time in 2013 that producers have been able to improve margins for PP. Several producers implemented a 1 cent/lb margin bump for January contract prices.

US PP contract prices for June were at 76-78 cents/lb DEL (delivered) for homopolymer injection and raffia grade material, as assessed by ICIS.

($1=€0.77)


By: Michelle Klump
+1 713 525 2653



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