NPE ’18: Force majeure weighing on US PP supply

HOUSTON (ICIS)–The US polypropylene (PP) market is facing tight supply conditions, heading into this year’s National Plastics Exposition (NPE), following LyondellBasell’s force majeure declaration from its 638,000 tonnes/year PP plant in Lake Charles, Louisiana.

Several PP plants had shutdowns during the first quarter, following a period of severe winter weather along the US Gulf Coast. During the early months of 2018, supply tightness was less keenly felt, as most converters were running at reduced rates after PP contract prices jumped to a 26-month high in January, owing to a strong run-up in propylene feedstock costs.

US PP contracts are generally formula-based and are set at polymer grade propylene (PGP) values plus an adder.

Supply tightness is being more strongly experienced as the market heads to NPE. Most converters have raised their operating rates and are rebuilding inventories, as domestic PP prices came down by a cumulative amount of 12 cents/lb ($265/tonne) during February and March prior to rolling over in April.

PP importers are seeing strong demand as buyers are eagerly seeking material, given the tightness in the domestic market. Meanwhile buyers in Latin America are meeting more of their needs from alternate supply sources, such as Asia and the Middle East, as fewer US export offers are appearing in the regional market.

Supported by firm demand and limited supply, sellers have separately announced margin expansions of 3-5 cents/lb effective as of 1 April, 1 May or as contracts allow. ICIS assessed a 1 cent/lb margin expansion on April contracts.

Participants state that negotiations on further margin expansions will be heavily influenced by changes in propylene pricing, with buyers stating that further expansions might not pass if propylene contracts move higher.

Sponsored by the Plastics Industry Association (PLASTICS), NPE2018: The Plastics Show takes place on 7-11 May in Orlando, Florida.