HOUSTON (ICIS)--US July propylene contracts settled at a 6 cent/lb increase from June as spot prices rose to one-year highs amid ongoing production issues.
The settlement puts July polymer-grade propylene (PGP) contracts at 32.5 cents/lb ($716/tonne) DEL (delivered) and chemical-grade propylene (CGP) at 31.0 cents/lb.
The settlement marks the largest month-on-month increase since June 2018, when contract prices rose 8 cents/lb from the prior month.
Front-month PGP traded in July at 29.5-39.0 cents/lb, compared with 21.5-28.0 cents/lb in June.
Outages affecting US PGP production include: Dow's propane dehydrogenation (PDH) unit in Freeport, Texas; INEOS's cracker in Chocolate Bayou, Texas; Formosa Plastics Corporation USA's cracker in Point Comfort, Texas; and BASF Total's cracker in Port Arthur, Texas.
Also, co-production of propylene was reduced as ethane's share of the US steam cracking feedslate is greater than it has ever been and is not expected to falter as heating demand for propane and butane rises in the colder months.
Cracking ethane produces ethylene with limited co-products, while cracking propane, butane and other heavier feeds yields propylene, among other chemicals.
Although US propylene supply faces a few short-to-medium-term production constraints, it is likely to be sufficient to meet slowly recovering demand in the latter half of 2020.
A slow global economy likely means demand weakness for propylene and its derivatives for the remainder of the year, with the possibility of further weak demand if coronavirus cases continue to spike.
The main outlet for propylene is as a feedstock for polypropylene (PP). Propylene is also used to produce acrylonitrile (ACN), propylene oxide (PO), a number of alcohols, cumene and acrylic acid.
Major US propylene producers include Chevron Phillips Chemical, Enterprise Products, ExxonMobil, Flint Hills Resources and Shell Chemical.
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