US August propylene expected to settle up by 4-5 cents/lb

HOUSTON (ICIS)–US August propylene contracts remained unsettled but are expected to rise by 4-5 cents/lb ($88-110/tonne), sources said on Wednesday.

Market players said that larger buyers are holding out for an increase of less than 5 cents/lb, while some smaller buyers have agreed to the 5 cent/lb increase.

US propylene contracts often settle 2-3 cents/lb above recent spot activity, which has been at 70 cents/lb for the past two reported trades.

July contracts for polymer-grade propylene (PGP) settled at 67.5 cents/lb, while chemical-grade propylene (CGP) was done at 66.0 cents/lb.

Sources said the recent surge in spot propylene is being driven mostly by concerns of impending supply tightness, especially as PGP and downstream polypropylene (PP) markets start to peak.

However, propylene inventories remain high and PP inventories are below average but not so short as to justify the recent surge in PGP, sources said.

Feedstock costs are also mostly steady year on year.

If the 5.0 cent/lb increase is accepted, it would put August contracts 2.5 cents/lb higher year on year.

The run-up in spot prices that hit at the end of July and early August led to one US propylene producer to nominate a 6.5 cent/lb increase for August contracts.

Major US propylene producers include Chevron Phillips Chemical, Enterprise Products, ExxonMobil, LyondellBasell and Shell Chemical.

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