US July MPG contracts steady-to-down on feedstock and rollover

11 July 2014 21:37 Source:ICIS News

NEW YORK (ICIS)--US monopropylene glycol (MPG) contract values for July were assessed as steady-to-down because non-formula-based contracts were rolled over and formula-dependent contracts followed the decline in the feedstock propylene contract in June, market sources said on Friday.

Contract prices were assessed at 94.65-100.63 cents/lb ($2,087-$2,219/tonne) FOB (free on board) in July from 94.65-102.64 cents/lb FOB in June for PG industrial grade (PGI). PG pharmaceutical grade (PGUSP) prices were at 100.65-106.63 cents/lb FOB in July from 100.65-108.64 cents/lb FOB in June.

PG anti-freeze grade (PGAF) was assessed at 85.00-91.63 cents/lb FOB in July from 85.00-93.64 cents/lb FOB in June. PG export contracts were assessed at 79.65-81.63 cents/lb FOB in July from 79.65-83.64 cents/lb FOB in June.

This is the third consecutive month of rollovers in non-formula-based, or freely negotiated, MPG contracts during a period when they typically go on a downtrend. Market sources confirmed the July rollover.

Market sources have said that freely-negotiated MPG contract prices normally decline from the time when the downstream anti-freeze and de-icing season ends through to summer when the anti-freeze pre-buying season begins in mid-July. The drop in demand from these sectors significantly softens MPG pricing.

However, some supply tightness coupled with healthy demand in other downstream sectors this spring and summer, particularly in unsaturated polyester resins (UPRs), stemmed the fall of freely negotiated MPG prices.

Meanwhile, formula-dependent contracts typically follow the trend in feedstock pricing, regardless of what price announcements are made by producers, a market participant said.

Non-freely negotiated MPG contracts for July fell in line with the 3 cents/lb ($66/tonne) decline in the June propylene contract price, on a formula-based correlation.

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.

MPG is a feedstock for 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