The price drop mirrored a 0.5 cent/lb ($11/tonne) drop in polymer-grade propylene (PGP) prices to 70.5 cents/lb for May.
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 that they also saw the slight drop in price this month.
With the decrease, US PP contract prices for April were at 82.5-84.5 cents/lb DEL (delivered) for homopolymer injection and raffia-grade material for medium to small volume buyers, as assessed by ICIS.
The price drop continues a three-month trend of slight price declines. However, prices are still nearly 9 cents/lb higher than they were in May 2013.
While demand continues to improve in the PP sector, much of that can be attributed to seasonal factors, sources said, adding that the slight price drop is not encouraging buyers to return to the market.
“It’s done absolutely nothing for demand,” said one distributor.
Many market participants are expecting prices to continue to slide in June and July, based on a slight easing in spot PGP prices. That expectation has buyers continuing to buy only as needed, not wanting to build any inventory until they feel the market has reached the bottom.
“I have the impression that everybody in the chain is pretty well hand-to-mouth,” said one producer.
“I think if there is a drop that occurs, there might be a bit of a feeding frenzy.”
The producer said that supply is fairly balanced now, but that if demand improves significantly as buyers attempt to take positions at what they perceive as the low point of the market, it could cause supply to tighten and cause propylene prices to rise.
A buyer agreed that it is buying hand-to-mouth at the moment, but said it believes the market could go either up or down, depending upon any number of factors.
“It is so hard to judge,” the buyer said. “The market has a bit of an identity crisis.”