US Dec MPG contracts increase 3-5 cents/lb on tight supply

14 December 2013 00:39 Source:ICIS News

NEW YORK (ICIS)--US monopropylene glycol (MPG) contract values for December settled higher on the back of tight supply, market sources said on Friday.

December contracts were assessed by ICIS up by 3.0-5.0 cents/lb ($66-110/tonne, €48-80/tonne).

PG industrial-grade (PGI) was assessed at 89.65-97.65 cents/lb free on board (FOB) east of the Rockies, while PG pharmaceutical-grade (PGUSP) was assessed at 95.65-103.65 cents/lb FOB east of the Rockies. PG antifreeze-grade (PGAF) was assessed at 80-88.65 cents/lb FOB east of the Rockies.

Formula-based contract pricing would have followed the decline in the November feedstock propylene contract, but the current tight supply, which has put at least two producers on allocation, has prompted producers overall to target higher December prices.

US MPG monthly contracts are strongly influenced by the delta of the previous month’s propylene contract price and generally follow formula-based pricing.

Formula pricing can be equivalent to two-thirds of the monthly delta of propylene or two-thirds of the propylene contract price plus an adder number, depending on which formula market participants use.

Monthly MPG trends also take into account pricing based on negotiations between buyers and sellers that are not dependent on the formula pricing.

Looking forward, US MPG contract values are expected to continue their upswing next month, as producers have already announced price increases this week, effective 1 January.

Demand is typically slow at this time of the year, as downstream antifreeze makers are generally not buying and surfactant producers typically shut down or slow down production.

However, demand this year was said to be healthy, with buying volumes anticipated to remain strong from November through December based on recent customer orders, one market player said.

PG is a feedstock for unsaturated polyester resins (UPR), cosmetics and personal care products, functional fluids and antifreezes, liquid detergents and dog food.

US producers include Archer Daniels Midland, Dow Chemical, Huntsman, LyondellBasell and Lonza.

($1 = €0.73)

By Feliza Mirasol