US propylene market quiet admid high prices, tight supply

21 August 2013 22:05  [Source: ICIS news]

HOUSTON (ICIS)--US propylene market activity has been limited at the start of the week, sources said on Wednesday, tracking several factors.

Several traders and brokers said that no trades for physical front month or forward month material have been heard in the first half of the week.

Some sources said that with prices for spot polymer-grade propylene (PGP) and refinery-grade propylene (RGP) at five-month highs, demand destruction has set in.

US spot PGP most recently traded at 68 cents/lb ($1,499/tonne, €1,124/tonne) while RGP most recently traded at 61 cents/lb, each more than a week ago.

US spot PGP prices are 20-21 cents/lb higher year on year, while RGP spot prices are 24-25 cents/lb higher.

The run-up in prices has only been moderately supported by downstream demand, sources said.

Most of the increase has come on the back of higher feedstock costs, especially for propane and paraffinic naphtha.

With feedstock costs continuing to rise, the theory is that buyers have retreated from the market, hoping for lower prices based on soft demand.

Additionally, market activity has been limited by overall tight supply, some sources said.

US propylene inventories are down by 44% year on year, according to the US Energy Information Administration (EIA).

Some sources, however, said the lack of activity is mainly related to seasonal factors caused by the US summer holiday.

($1 = €0.75)

By: John Dietrich

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