US January propylene contracts fully settle up 4 cents/lb

HOUSTON (ICIS)–US January propylene contracts have fully settled up 4 cents/lb ($88/tonne), sources confirmed on Thursday.

The settlement puts January polymer-grade propylene (PGP) contracts at 74.5 cents/lb and January chemical-grade propylene (CGP) contracts at 73.0 cents/lb.

The increase came in below initial nominations, which were for a 7.5 cent/lb increase in PGP and a 7.0 cent/lb increase for CGP.

This is because spot propylene prices peaked in the 74-75 cents/lb range in late December and early January before a sell-off pushed the price down into the low-70s cents/lb level.

“There was someone out there who wanted to sell and that knocked the price down,” a source said. “Demand also came down as there was some pre-buying in December that normally would have happened in January.”

Sources said that when it became clear that January contracts would go up, buyers rushed to build up inventories, which pushed spot prices to their high.

However, spot prices started coming down in January, postponing the settlement and limiting the upside of the market.

Buyers said the spot price surge was overdone, as propylene’s key derivative, polypropylene (PP), loses some of its competitive pricing against other polymers when propylene is in the mid-70s cents/lb to high-70s cents/lb level.

Some market players said that they expect prices will remain strong, as several planned cracker turnarounds should tighten the market.

US propylene contracts typically settle 2-3 cents/lb above the current level for spot prices and do so in the first half of the month for that month.

Major US propylene producers include Chevron Phillips (CP Chem), ExxonMobil, LyondellBasell, PetroLogistics and Shell Chemical.

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