29 March 2014 16:10 [Source: ICIS news]
HOUSTON (ICIS)--US polypropylene (PP) demand is expected to improve significantly in the second quarter, as buyers return to the market after what many described as a dismal first quarter, sources said heading into the International Petrochemical Conference (IPC).
The weak demand so far in 2014 is based on a few factors, including severe weather across much of the US that caused production and logistical problems for suppliers and processors, as well as buyers living off of inventories they built in November and December of 2013 in anticipation of huge price spikes that never materialised.
Prices rose by around 5 cents/lb ($110/tonne) in January, including a 1 cent/lb margin gain achieved by producers. Subsequently, prices have begun to inch down, including a 1 cent/lb drop in February and a 1.5 cent/lb drop in March.
The slight price declines in February and March have so far not been enough to spur buyers to return to the market. Divergent views on April pricing, with expectations ranging from a decline of 2 cents/lb to an increase of 2 cents/lb, are also keeping buyers on the sidelines.
“Customers are again looking to see what happens before committing to anything,” said one distributor.
But once demand hits, many market participants have said they believe it will come in a deluge, with producers unable to produce enough material to keep up with demand.
“Once demand hits, it’s going to be a tsunami,” one market participant said.
The fundamentals of the PP business are not expected to change significantly in the near term, with propylene expected to be tight until 2016 or 2017, when more on-purpose propylene projects come on stream.
So far, there have been announcements of at least eight such projects, expected to bring at least 4m tonnes/year of additional propylene capacity to the market. Much of that propylene will be aimed at the PP market, sources have said.
Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC takes place 30 March-1 April in San Antonio, Texas.
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