Rising PP costs pose long-term raw material challenge: RPM CEO

09 October 2013 19:59  [Source: ICIS news]

HOUSTON (ICIS)--RPM International is facing a longer-term challenge from rising costs for its polypropylene-based raw material inputs as the US petrochemical industry relies more and more on lighter gas-based feedstocks that yield less propylene and polypropylene (PP), the CEO of the US-based coatings and sealants firm said on Wednesday.

“If the trends in PP supply and pricing continue as they are, that’s going to be a problem,” CEO Frank Sullivan told analysts during RPM’s fiscal 2014 first-quarter earnings call.

PP is “the backbone” of many of the chemical raw materials RPM purchases, Sullivan said.

As such, the mix-change in US petrochemicals production toward more and more gas, and less naphtha cracking “is one area that seems to be moving in the wrong direction, and we are paying a lot of attention to it”, he said.

“On its face, this [mix-change] is a very worrisome long-term challenge”, he said.

Sullivan added that he hopes there will be other sources, such as on-purpose propylene production, to meet demand.

He also said that with Asia's build-up of petrochemical capacities, fewer North American supplies of petrochemicals, such as PP, will be pulled into that market in the future.

The US has become short of propylene because of the advent of shale gas. Shale gas has prompted US petrochemical producers to crack ethane and other natural gas liquids (NGLs), which are cheaper than oil-based naphtha but produce less propylene.

However, Jim Gallogly, CEO of international petrochemicals major LyondellBasell, said last month that the number of proposed new US on-purpose propylene plants should create a balanced market for the monomer.

Additional reporting by Al Greenwood

By: Stefan Baumgarten
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