US forward-month PGP jumps on pre-buying, supply concerns

25 November 2013 23:02  [Source: ICIS news]

US forward-month PGP jumps on pre-buying, supply concernsHOUSTON (ICIS)--US forward month polymer-grade propylene (PGP) moved up on Monday, moving the market further into contango.

Sources said December PGP traded at 67.5 cents/lb ($1,488/tonne, €1,101/tonne) and twice at 68.0 cents/lb on Monday.

The trades were all higher than the previous deal for December PGP, done at 66 cents/lb on 21 November.

The rise came as buyers and sellers said downstream polypropylene (PP) market players are trying to get ahead of expected price increases at the start of 2014.

“They might be creating a self-fulfilling prophecy,” a propylene buyer said. “And we might see that increase now instead of later.”

Prices are expected to increase in January on improved buying interest and expectations of tighter supply on the pending cracker turnaround season in the first quarter.

The surge in December PGP came while front-month November PGP was quiet, with no bids or offers heard.

November PGP had been in contango by 0.25 cents/lb to close the previous week, but with prices steady, the gap widened to 2.25 cents/lb on Monday.

The surge in PGP was not fuelled by higher costs for feedstock refinery-grade propylene (RGP), as December material traded at 55.25 cents/lb.

The previous reported RGP deal for front-month November material was heard at 54.75 cents/lb.

If the December RGP/PGP spread holds based on the trades completed on Monday, it would widen, allowing for higher margins for propylene splitters.

Major US propylene producers include Chevron Phillips, ExxonMobil, LyondellBasell, PetroLogistics and Shell Chemical.

Major buyers include Ascend Performance Materials, Dow Chemical, INEOS and Total.

($1 = €0.74)

By: John Dietrich

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