Much of the PP market has a monomer-based contract that follows the monthly polymer-grade propylene (PGP) price. PGP prices settled up by 5 cents/lb to 72.500 cents/lb.
In addition to the cost pressure from propylene, most producers were seeking additional increases of between 2-4 cents/lb in an effort to expand margins.
In some cases, sources said some buyers will accept an extra 1-2 cents/lb in margin expansion as early as August. But many sources, including some producers, agreed that the majority of the contract market will not see any margin expansion increase until the end of the year.
“The reality is the majority of business is covered by current contracts,” said one producer. “We will begin to negotiate those new contracts in October, November and December.”
The producer said the bulk of contracts will see movement in January 2015 when the new contracts take effect.
Other producers were heard to have taken a hard line in implementing margin expansion in August. However, the ICIS assessment for August does not include any additional margin expansion, since it has not been implemented market-wide.
Sources agreed that spot prices are carrying the premium with spot prices up by around 7 cents/lb for the month. Spot availability remained limited, and some buyers said they are having difficulty obtaining as much resin as they would like to buy.
Prices were expected to remain firm in the coming months, as the peak demand season gets into full swing, sources said.
With the August increase, US PP contract prices were at 84.5-86.5 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.