US December PP contracts rise 4 cents/lb on higher propylene

HOUSTON (ICIS)–US polypropylene (PP) contracts for December generally settled higher by 4 cents/lb ($88/tonne, €64/tonne), following movement in propylene contracts, sources said on Thursday.

US PP contract prices for December were at 81.50-83.50 cents/lb DEL (delivered) for homopolymer injection and raffia-grade material for medium-to small-volume buyers, as assessed by ICIS.

Much of the PP market has a monomer-based contract that follows the monthly PGP price, which settled higher by 4 cents/lb at 70.5 cents/lb for December.

The increase came as a surprise to many buyers who had anticipated flat to slightly lower pricing in December, based on the typical seasonal slowdown in demand.

“Everyone was hoping to take advantage of lower pricing,” said one distributor.

Buyers agreed, with one saying it had planned on doing much of its pre-buying for 2014 in December, when it believed prices would be at their lowest point.

Now, buyers are scrambling to buy material, even at the higher prices, out of fear of an additional increase in January.

“We did not expect PP to go up in December,” said one buyer. “We are prebuying in December — wish we would have done that in November.”

Supply has tightened significantly, with many buyers “jumping all over themselves trying to buy stuff,” said one trader. The higher demand has cause spot prices to rise, in some cases, even higher than contract prices, the trader said.

Market participants are predicting another increase of as much as 3-5 cents/lb in January. 

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

($1 = €0.73)