US March propylene expected to fall on weaker spot market

06 March 2014 20:55 Source:ICIS News

HOUSTON (ICIS)--US March propylene contracts are expected to fall, tracking weakness in the spot market, sources said on Thursday.

Sources expect March contracts to shed 1-2 cents/lb ($22-44/tonne) from the February settlement, which had polymer-grade propylene (PGP) at 73.5 cents/lb and chemical-grade propylene (CGP) at 72.0 cents/lb.

The decline mostly stems from steady but slightly softer pricing in the spot PGP market, which has been in the high-60s cents/lb for most of February.

US PGP contracts typically settle 2-3 cents/lb above recent spot activity.

However, several recent trades at 69.5 cents/lb have some market players arguing that a rollover is also a possibility.

These sources added that refinery-grade propylene (RGP) spot prices have been climbing since the last week of February, up to 63.5 cents/lb.

With propylene splitters looking for a margin of 8-10 cents/lb between spot RGP and contract PGP, sources said that they might hold out for a rollover or decline of 1 cent/lb.

RGP's recent rise is being fuelled by supply tightness and better demand from the gasoline market, neither of which is translating to the PGP market, sources said.

PGP demand is steady, with buyers hoping for a March contract fall to build inventories before expected increases in April because of the upcoming cracker turnaround season, sources said.

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

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

By John Dietrich