US Oct propylene rises 4 cents/lb on continued tight supply

HOUSTON (ICIS)–US October propylene contracts reached a full settlement, sources said on Friday, moving up on tight supply.

Sources confirmed a jump of 4 cents/lb ($88/tonne), putting October polymer-grade propylene (PGP) at 76.5 cents/lb and October chemical-grade propylene (CGP) at 75.0 cents/lb.

The increase puts propylene contracts up 9 cents/lb year on year, which has led to concerns about demand destruction, especially polymer production.

However, prices have been strong because of tight supply and low inventories, stemming from cracker issues throughout the year.

Sources said US crackers have lost an average of 8-12% for every month since March, with October production losing more than 10%.

The long-term production losses have prevented any inventory building for propylene, adding to current supply tightness.

Additionally, the US refinery turnaround season in the third quarter has limited production of refinery-grade propylene (RGP), with inventories at their lowest in more than three years.

As a result, spot prices for PGP have been comfortably in the low-70s cents/lb to mid-70s cents/lb for October, lending support to contract settlements in the mid-70s cents/lb.

Some sources had expected a protracted settlement process, especially as spot RGP prices were at parity or higher than spot PGP prices for parts of the month.

Some sources said spot RGP prices should start to come down as refineries return to higher operating rates, improving supply and widening the spread between RGP and PGP.

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

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

The following lists US CGP prices through September.