US August PP contracts rise 5 cents/lb on higher propylene

15 August 2013 21:59  [Source: ICIS news]

US August PP contracts rise 5 cents/lb on higher propyleneHOUSTON (ICIS)--US polypropylene (PP) contracts for August generally settled higher by 5 cents/lb, despite efforts by some producers to expand margins during the month, sources said on Thursday.

US PP contract prices for August were at 81-83 cents/lb ($1,786-1,830/tonne, €1,339-1,372/tonne) DEL (delivered) for homopolymer-injection and raffia-grade material for medium- to small-volume buyers, as assessed by ICIS.

Much of the PP market has a monomer-based contract that follows the monthly PGP price, which settled up by 5 cents/lb at 70.00 cents/lb for August.

While some producers had announced intentions to implement an additional 2 cent/lb margin bump for PP for August, market participants said they have not seen that be implemented this month.

"Even customers that are not on formula contracts, there is very little evidence that anybody is taking more than what the market is taking with PGP," said one distributor. "I think it is posturing."

Buyers agreed, saying that they are not seeing more than a 5 cent/lb increase for the month. However, sources said they expect efforts for a margin increase to be renewed at the end of the year when it is time to renegotiate contracts.

The 5 cent/lb increase came as a shock to much of the market, which had been expecting an increase of around 2-3 cents/lb for August.

Sources debated whether such a large increase would result in loss of demand for PP, with some sources saying PP prices above 80 cents/lb might be enough to scare buyers away from the market.

"In September, when people have full visibility of this 5 cents, we will see what happens to demand," a broker said.

Sources were divided on price direction for September. Some sources have said if demand weakens, it could cause prices to fall, while others have said upcoming production outages in the propylene market could cause prices to rise again.

Major North American PP producers include LyondellBasell, ExxonMobil, INEOS, Total, Formosa Plastics, Braskem Americas, Pinnacle Polymers, Phillips 66 and Flint Hills Resources.

($1 = €0.75)

By: Michelle Klump
+1 713 525 2653

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