US October PP increases by 4 cents/lb following PGP settlement

HOUSTON (ICIS)–US October polypropylene (PP) contracts have settled up by 4 cents/lb, following the settlement of a key feedstock last week, buyers and sellers said on Thursday.

Buyers and sellers said last week’s settlement of the October polymer-grade propylene (PGP) contract at a 4 cent/lb increase fixed the same hike for PP.

“No ifs ands or buts, it’s over for October,” a PP buyer said.

What happens with propylene usually determines the increase or decrease in US PP, because most contracts in that commodity have monomer-plus based pricing.

“That’s been the history for the past five years,” another buyer said.

US PP contract prices for October rose to 89.50-91.50 cents/lb DEL (delivered) for homopolymer injection and raffia-grade material for medium to small volume buyers, as assessed by ICIS.

Producers separately nominated October PP contracts to rise by 3-8 cents/lb before Formosa and Total separately issued 10.5 cents/lb nominations.

The latter proposals seemed targeted at producers’ goal of expanding margins, but most buyers and traders dismissed the huge nominations as beyond consideration because too many contracts are linked directly to PGP to support much higher prices.

A trader said the increases made no sense based on supply and demand.

“Demand is not really supporting this increase,” the trader said. “Inventories are definitely on the higher side.”

A few sources predicted price cuts in November and/or December, based on speculation about where PGP and refinery-grade propylene (RGP) might end up.

One source noted that PGP for December is priced a few pennies below current spot PGP, and that RGP prices this week – down to 60 cents/lb on Thursday from previous offers at 64 cents/lb – show that supplies are improving.

“Look out below in November,” a buyer said, “because there’s going to be a big downward movement in polypropylene.”

A producer also said prices might fall back in November if PGP reversed.

“That’s normal for things to tail down at the end of the year,” the producer said.

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