US Jan MPG contracts rise 5 cents/lb on continued tight supply

10 January 2014 23:01 Source:ICIS News

NEW YORK (ICIS)--US monopropylene glycol (MPG) contracts for January were assessed 5 cents/lb ($110/tonne) higher on Friday because of continued tight supply, fairly strong demand and higher upstream costs.

Propylene glycol industrial-grade (PGI) is at 94.65-102.65 cents/lb ($2,087-2,263/tonne) FOB (free on board) in January, up from 89.65-97.65 cents/lb FOB in December, as assessed by ICIS.

PG pharmaceutical-grade (PGUSP) is at 100.65-108.65 cents/lb FOB in January, up from 95.65-103.65 cents/lb FOB in December, as assessed by ICIS.

PG anti-freeze grade (PGAF) is at 85.00-93.65 cents/lb FOB in January, up from 80.00-88.65 cents/lb FOB in December, as assessed by ICIS.

Market participants said that tight supply resulting from production problems during the last half of 2013 prompted a push for higher prices.

In addition, demand was said to be surprisingly healthy during a typically slow season. One market participant noted that orders from customers were robust in December, a month when MPG demand is traditionally soft.

Another participant said that the US MPG market has been underpriced for quite some time and that prices needed to catch up with market strengthening factors.

Formula-based contracts, meanwhile, would have followed the increase seen in December contract settlement for upstream propylene.

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

Formula pricing can be equivalent to two-thirds of the monthly change in the propylene contract 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.

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.

By Feliza Mirasol