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

HOUSTON (ICIS)–US polypropylene (PP) contract prices for April fell slightly, following a drop in feedstock propylene costs, sources said on Thursday.

The price drop mirrored a 1 cent/lb ($22/tonne) drop in polymer-grade propylene (PGP) prices to 71 cents/lb for April.

Much of the PP market has a 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 April were at 83-85 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 mostly in line with market expectations, with most sources expecting a rollover to a decline of around 2 cents/lb.

Demand is improving in the PP sector, but much of that can be attributed to seasonal factors rather than the slight price drop, according to buyers and suppliers.

Q1 demand was well below expectations, in part because buyers had loaded up on inventory at the end of 2013, but mostly because of severe weather that caused production and logistics delays across the country.

Those issues have mostly been resolved. However, one producer said that its orders for April are likely a little weaker because a backlog of late deliveries finally arriving in March caused some buyers to be long on material heading into this month.

“There is still some holdover from the first quarter’s weather and logistics issues,” the producer said. “Those late deliveries got there in March along with the regular deliveries and really put people into a heavier inventory position than they otherwise would have been.”

The producer said that its April orders are still above the 12-month average, and are significantly better than March levels, but are weaker than expectations.

Others agreed the demand has not returned in full-force yet, adding that many buyers are still anticipating further price drops in May and June.

The April price drop “is not enough to bring people back to the market … especially if they think it can go lower”, said one buyer. “They will just stay out and wait for it to drop before they jump back in.”

Expectations for May are for another slight price drop, sources said. However, with PGP prices holding fairly steady, some sources said there is a possibility for a rollover.

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