US May PP drops 4 cents/lb on import surge

HOUSTON (ICIS)–US May polypropylene (PP) contracts dropped 4 cents/lb ($88/tonne), sources said on Friday, following the price-cut announcement of a big producer early in the month.

The second monthly contract cut in a row this year stems from the wave of imported material that has come ashore in response to high US prices.

Producers reduced April monthly contract values for the first time in seven months, and the price cut in May puts the market down by at least 3-4 cents/lb so far this year.

That deficit could more than double in another month because of separate announced June price cuts by ExxonMobil and Formosa Plastics that call for reductions of 5 cents/lb.

Though the import total this year represents a relatively small percentage of production, still in single digits, those shipments have caused quite a stir in the market.

The imports stemmed from PP producers’ focus on increasing margins throughout 2015 because of lower feedstock costs that ultimately brought about higher polymer prices.

US PP now ranks among the highest in the world and, even with the May drop, is at least 15 cents/lb higher than most Asian prices.

PP shipped from South Korea, the Middle East and Latin America to the US in March 2016 equalled imports in the first three months of 2015.  

The Plastics Exchange, a trading group in Chicago, said in a recent note that producers now appear to be giving back some of the margin they collected last year.

“It took some time, but the phenomenon of polypropylene imports has truly made an impact,” the note said.

ExxonMobil set the tone for May by announcing early a big 3-5 cent/lb drop, which came in response to imports that began arriving late last year.

Meanwhile, US PP inventory has piled up to a record high because of the additional import material. A trader said imports are the difference between a market that is at least temporarily oversupplied and one that at this time last year was very tight.

“The [PP] market would still be tight if you could send back all the imports,” a trader said.

Major producers include Braskem, ExxonMobil, Flint Hills Resources, Formosa Plastics, Indelpro, INEOS, LyondellBasell, Phillips 66, Pinnacle Polymers and Total.

(Photo: Bottle caps are often made of polypropylenel. Source: PhotoAlto/REX/Shutterstock)