US July PP contracts roll over on flat propylene

Focus story by Michelle Klump

HOUSTON (ICIS)–US polypropylene (PP) contract prices for July settled flat on steady propylene costs, despite outages and tight supply in the market, sources said on Thursday.

Much of the PP market has a monomer-based contract that follows the monthly PGP price. Those buyers who have moved to index-based contracts said they also saw the rollover for the month.

One producer, Total Petrochemicals, had announced a 4 cent/lb price increase for all grades of PP, effective on 7 July. The announcement was an effort by the company to improve the base margin for PP.

However, sources said that effort was not successful for contract business this month. Sources said they expect producers to continue to pursue margin expansion throughout the remainder of the year.

Already, a second producer, LyondellBasell, has announced a 2 cent/lb margin bump to be effective in August.

Some buyers said the announcements have been timed to take advantage of the current tight supply situation, with at least two producers, including Formosa Plastics and Pinnacle Polymers, allocating PP during the month. A third producer was heard to be having production problems, while three additional producers were heard to have oversold material in July.

The result has been that while contract prices have not risen, off-grade and spot prices have started to rise.

“The off-grade market is a leading indicator of where pricing is going, and those prices are very good,” said one producer.

A trader agreed that spot prices are higher, but said it has been surprised that even with the tight supply, there has not been greater demand from buyers for spot material.

“You are not getting this panicky wave of buying sentiment,” the trader said. “[Buyers] are just not going to pay a whole lot extra to buy spot material in this market.”

Sources were divided on price direction for August, with some seeing more stable pricing based on comfortable propylene inventory levels and others seeing the potential for a price increase on stronger PP demand.

US PP contract prices for July were at 79.5-81.5 cents/lb DEL (delivered) for homopolymer injection and raffia-grade material for medium to small volume buyers, as assessed by ICIS.

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