Focus article by Jessie Waldheim
HOUSTON (ICIS)--Discussions for US June propylene contract prices have ranged from a slight increase to a slight decrease amid falling inventories and expectations of increasing supply.
Nominations from some producers for June contract prices have been heard between a rollover and a 1 cent/lb increase. However, buyer ideas for June contract prices have ranged from a rollover to a 2 cent/lb decrease, according to market sources.
May polymer-grade propylene (PGP) contract prices had settled at 38.5 cents/lb, a decline of 7.5 cents/lb. It was the second consecutive monthly drop in contract prices as supply recovered from a tight first quarter.
Part of that supply recovery had been due to turnarounds for multiple derivative plants during April and May. Several of those plants restarted in May, another restarted in early June and another is restarting this week. Only one derivative plant remains in a turnaround, and that plant is expected to restart later this month.
Amid the derivative turnarounds, propylene inventories have been falling over the last several weeks. Inventories for the week ended 2 June fell to 2.794m bbl, a 7.9% drop from the prior week, according to data from the US Energy Information Administration.
"Despite the drop in inventory, there is ample propylene available especially since demand is soft for a number of buyers," a market source said.
Additionally, the market is anticipating the restart of a US Gulf propane dehydrogenation (PDH) unit will increase production and lengthen the propylene market. The unit, which began a 60-day turnaround in late May, has been expected to restart in early June, but market sources have said it has not yet done so.
Overall propylene production is expected to expand as new capacity comes online.
A new PDH unit in the US Gulf is expected to be fully commissioned by the end of this quarter, with production beginning in July. A new cracker in the US Gulf is expected to start production in the second half of the year.
While the falling inventories and restarting derivative plants are putting upward pressure on the propylene market, the expected restart of the PDH unit and anticipation of capacity expansion continues to exert some downward pressure.
Spot prices offer little direction for contract prices. Polymer-grade propylene (PGP) spot prices had been relatively steady but had a slightly higher midpoint this week, while refinery-grade propylene (RGP) prices have been softening.
On Friday, ICIS assessed US PGP spot prices at 37.00-37.25 cents/lb, compared to 36.50-37.50 cents/lb in the previous week, and ICIS assessed US RGP spot prices at 23.00-24.00 cents/lb, compared to 24.00 cents/lb in the previous week.
US propylene contracts are typically settled in the middle of the month for the current month.
Major US propylene producers include Chevron Phillips Chemical, Enterprise Products, ExxonMobil, Flint Hills Resources and Shell Chemical.
Major buyers include Arkema, Ascend Performance Materials, Braskem, Dow Chemical, INEOS, Oxea and Total.
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