Formosa announces additional 2 cent/lb increase for August PP

14 August 2013 22:15  [Source: ICIS news]

HOUSTON (ICIS)--US polypropylene (PP) producer Formosa Plastics announced an additional 2 cent/lb ($44/tonne, €33/tonne) price increase for all grades of PP effective on 16 August, on top of a previous 4 cent/lb increase announced for 1 August, sources said on Wednesday.

The announcement, made in a 13 August customer letter, comes after August polymer-grade propylene (PGP) contracts settled higher by 5 cents/lb for the month.

While much of the US PP market remains on a monomer-plus formula contract basis, which follows the monthly change in feedstock propylene costs, Formosa Plastics moved away from monomer-plus contracts this year.

As part of their market-based pricing, the company still must pass on increases for feedstock propylene to customers each month.

Sources said they believe the company was expecting its initial 4 cent/lb price increase announcement for 1 August to cover any increase for propylene costs for the month. However, the 5 cent/lb increase for propylene was more than most market participants expected.

"Nobody expected this 5 [cent/lb increase]," said one PP distributor. "People were thinking 2 cents/lb or something like that, so to get popped in the nose with 5 right now is not a good thing."

Sources speculated that the mid-month increase announcement by Formosa is an effort by the company to regain some of the penny the company left on the table with customers who placed orders earlier in the month and only saw a 4 cent/lb increase.

However, buyers said they do not believe Formosa, or any other PP producer, will be able to implement anything more than the 5 cent/lb increase in propylene costs for August.

"Not with me," said one buyer, who said it has already heard from two other major suppliers that it will only see a 5 cent/lb increase for PP for the month. "It is 5 [cents/lb]. Boom, end of story."

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

($1 = €0.75)

By: Michelle Klump
+1 713 525 2653

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