US May propylene contracts fall 16% on improved supply

Focus article by Jessie Waldheim

HOUSTON (ICIS)–US May propylene contract prices have settled down 7.5 cents/lb from April, market sources confirmed on Friday, as derivative turnarounds have curbed demand and helped rebuild supply.

Propylene contracts settled on Thursday and Friday, putting May polymer-grade propylene (PGP) at 38.5 cents/lb ($849/tonne) and chemical-grade propylene at 37 cents/lb. The settlement follows a 6 cent/lb decline for April contract prices.

The declines are in line with market expectations as supply has been improving over the last several weeks after a tight market during the first quarter.

Data from the US Energy Information Administration (EIA) has shown inventory growth for non-fuel propylene throughout April and into early May. Despite the build-up, inventory levels for the week ended 5 May remained significantly lower than the prior year, down 19% from the same week in 2016.

“The market actually feels longer than the inventory level,” one market source said.

Supply had tightened early in the year due to planned turnarounds and unplanned outages for US Gulf crackers and several turnarounds for US Gulf refineries. As those crackers and refineries came back online in March and April, propylene production rose.

Downstream markets have continued to help propylene supply rebuild, as multiple derivative turnarounds have curbed demand. Three downstream plants had turnarounds during April. While those plants have restarted or are restarting this week, three more derivative plants have begun or are scheduled to begin turnarounds in May.

Demand should rebound during June, with these derivative turnarounds scheduled to be complete by early June.

However, production also is expected to expand as a turnaround at a US Gulf propane dehydrogenation (PDH) plant is scheduled to be complete in early June. Following that, a new US Gulf PDH plant is expected to be online in the third quarter.

US propylene contracts are typically settled in the middle of the month for the current month.

Major US propylene producers include Chevron Phillips Chemical, Enterprise Products, ExxonMobil, Flint Hills Resources and Shell Chemical.

Major buyers include Arkema, Ascend Performance Materials, Braskem, Dow Chemical, INEOS, Oxea and Total.

Image above: Propylene is used to make polypropylene, which is used to make bottles like those shown above. Source: Monkey Business Images/REX/Shutterstock