US April PP declines by 3 cents/lb on growing imports

HOUSTON (ICIS)–US polypropylene (PP) April contracts dropped 3 cents/lb this week, largely because of competition from imports, sources said on Friday.

It was the first drop on the monthly contract in seven months.

The decline marks the influence of increasing imports, which tripled in February because of processors and converters seeking cheaper PP in Asia, Latin America and the Middle East.

Buyers and traders say producers had no choice in April but to follow ExxonMobil’s announced price cut in order to protect their market share.

The reduction shows a different attitude from the margin mania that dominated US PP in 2015 in which producers picked up 1-2 cents/lb of extra margin in nearly every month. Buyers say producers have been humbled by imports.

“They don’t have their chests stuck out anymore,” a distributor said.

While PP imports represent a single-digit percentage of North American production, that percentage has tripled over the past year.

Industry data from the American Chemistry Council (ACC) and the International Trade Commission (ITC) show that February 2016 imports represented 6.2% of total North American production, compared with only 2.1% of production in the same month of 2015.

Source: International Trade Commission

Buyers say imports may decline in coming months because of the slack summer season, but not back to 2015 levels.

“Imports aren’t going away completely,” a buyer said. “Whatever the strategy, there will always be pounds coming in.”