US February PP contracts fall 1 cent/lb on lower propylene

28 February 2014 09:51 Source:ICIS Chemical Business

Demand has weakened due to the poor weather plus inventory-building at the end of 2013

US polypropylene (PP) contract prices for February dropped by a penny, based on a slight drop in feedstock propylene costs, sources said on 20 February.

The penny drop mirrored a 1 cent/lb ($22/tonne) drop in polymer-grade propylene (PGP) prices to 73.5 cents/lb for February.

Much of the PP market has as monomer-based contract that follows the monthly PGP price. However, even those buyers who have moved to index-based contracts said they also saw the slight drop in price in February.

With the decrease, US PP contract prices for January were at 85.50-87.50 cents/lb DEL (delivered) for homopolymer injection and raffia-grade material for medium-to small-volume buyers.

The drop was slightly less than was expected, with buyers hoping for a fall of 1.5-2 cents/lb.

Sources said drop had no impact on demand, which was weak in February. Some said demand is artificially weak because buyers built inventories in November and December, anticipating a huge price increase in the first quarter, as has been seen in the previous two years.

Others said weak downstream demand from severe weather across much of the US, which has kept consumers at home instead of in retail establishments. Most sources said they expect demand to bounce back, beginning in late March or early April, as PP buyers need to reload their stocks and downstream consumers return to the market.

Market participants were uncertain about the price direction for March, with some saying they expect another slight decrease, and others saying there is a potential for an increase, particularly with a number of cracker turnarounds scheduled for April.

By Michelle Klump