US February PP contracts fall 1 cent/lb on lower propylene

HOUSTON (ICIS)–US polypropylene (PP) contract prices for February dropped by a penny, based on a slight drop in feedstock propylene costs, sources said on Thursday.

The penny drop mirrored a 1 cent/lb ($22/tonne) drop in polymer-grade propylene (PGP) prices to 73.5 cents/lb for February.

Much of the PP market has as monomer-based contract that follows the monthly PGP price. However, even those buyers who have moved to index-based contracts said they also saw the slight drop in price this month.

With the decrease, US PP contract prices for January were at 85.50-87.50 cents/lb DEL (delivered) for homopolymer injection and raffia-grade material for medium-to small-volume buyers, as assessed by ICIS.

The price drop was slightly less than was originally expected, with buyers hoping for a fall of 1.5-2 cents/lb for the month.

Market participants said the price drop has had no real impact on demand, which has been very weak in February.

“It really hasn’t changed the outcome of much of anything,” said one trader. “We didn’t see a very robust January, and I would say that February is going to be even softer from a demand standpoint.”

Some sources said demand is artificially weak because many buyers built inventories in November and December, anticipating a huge price increase in the early first quarter, as has been seen in the previous two years.

Others have attributed the weakness to weak downstream demand resulting from severe weather across much of the US, which has kept consumers at home instead of in retail establishments.

Most sources said they expect demand to bounce back, beginning in late March or early April, as PP buyers need to reload their stocks and downstream consumers return to the market.

“I am still pretty bullish about the year,” said one market participant. “Once demand hits, it’s going to be a tsunami.”

Market participants were uncertain about the price direction for March, with some saying they expect another slight decrease, and others saying there is a potential for an increase, particularly with the number of cracker turnarounds scheduled for April.

Major North American PP producers include LyondellBasell, ExxonMobil, INEOS, Total, Formosa Plastics, Braskem Americas, Pinnacle Polymers, Phillips 66 and Flint Hills Resources.