Propylene prices may keep falling due to demand destruction - exec

06 February 2014 17:23  [Source: ICIS news]

HOUSTON (ICIS)--US propylene prices are likely to keep falling despite tight supply as downstream products work to keep their material competitive overseas, an executive with US producer PetroLogistics said on Thursday.

“Demand is improving, but prices could be limited by a lack of arbitrage opportunities for polypropylene producers,” said executive chairman David Lumpkins during the company’s Q4 earnings conference call.

US January polymer-grade propylene (PGP) contracts settled at 74.5 cents/lb ($1,642/tonne), nearing the high-70s cents/lb level that has often resulted in demand destruction.

This stems from downstream polypropylene (PP) producers pushing their prices high enough to enable competition from other polymers.

Lumpkins said that the concerns about arbitrage and prices would likely outweigh tighter supply of propylene in the coming months because of several planned cracker turnarounds.

PetroLogistics, which operates the only propane dehydrogenation (PDH) plant currently in the US, said that the recent surge in feedstock propane prices was outweighed by higher prices for PGP in the fourth quarter of 2013.

“This has been a winter in which events conspired to drive up propane prices,” Lumpkins said.

Lumpkins said the average PGP price for the fourth quarter was 68.2 cents/lb, close to the average for the third quarter, which was not specified.

By: John Dietrich

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