HOUSTON (ICIS)--With US polymer-grade propylene (PGP) spot prices slipping, sources said on Wednesday that they expect January contracts to settle below nominations.
US January PGP contracts were initially nominated up 7.5 cents/lb ($165/tonne), which would have put them at 78.0 cents/lb.
However, that was when US spot PGP was trading in the 74-75 cents/lb level, bolstered by tight supply and strong demand as inventory building was taking place ahead of the expected increases.
Since then, spot prices have fallen despite a lack of contract settlement, with material trading at 71.5 cents/lb on Wednesday.
Sources said they were surprised by the fall, as producers were expected to hold out on spot sales until a strong January settlement was reached.
Based on the most recent spot trades, US January PGP contracts are likely to gain 4.0-4.5 cents/lb from the December settlement of 70.5 cents/lb.
Market players agreed that PGP is tight and that supply tightness is expected to continue throughout the first quarter as the US cracker turnaround season begins.
This has led to inventory building for most buyers, which allowed producers to increase December contracts by 4 cents/lb despite year-end inventory taxes looming.
US propylene contracts often settle 2-3 cents/lb above recent spot trades and do so at the start of the month for that month.
Major US producers include Chevron Phillips Chemical (CP Chem), ExxonMobil, LyondellBasell, PetroLogistics and Shell Chemical.
Major buyers include Ascend Performance Materials, Dow Chemical, INEOS and Total.