PP producers seek 10.5 cent/lb hikes for Oct on feedstock jump

HOUSTON (ICIS)–US polypropylene (PP) producers Total Petrochemicals and Formosa Plastics separately issued 10.5 cent/lb ($231/tonne) increases for October this week, as higher than-expected propylene increases appeared on Wednesday.

The proposed increases far exceed previous expectations of an increase of 2-5 cents/lb, which was based on a previous propylene nomination of 5 cents/lb.

“Nobody’s happy about it,” a PP trader said. “Everybody’s a little shocked over it.”

This week, a polymer-grade propylene (PGP) producer raised its nomination from 5 cents/lb to 7.5 cents/lb. Continuing cracker outages since March have depleted propylene supplies to the point that the spot price for refinery-grade propylene (RGP), which usually trails PGP, is now running 2-3 cents/lb ahead of it.

“It’s because of a huge draw on inventories,” another source said of the Total and Formosa PP announcements.

US PP contract prices for September were at 84.50-86.50 cents/lb DEL (delivered) for homopolymer injection and raffia grade material for small-volume buyers, as assessed by ICIS.

The Total and Formosa letters to customers this week each separately said the price increase is in addition to all previously announced price increases.

Much of the PP market has a monomer-based contract that follows the monthly PGP cost.

In recent years, there has been a set margin for PP, with PP prices changing according to any fluctuation in the price of PGP.

US PP producers have succeeded in implementing about a penny of extra margin in 2013 and another penny in 2012. So far this year, producers have succeeded in adding another penny, but the recent nominations indicate they are seeking more than that.

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