US June propylene settles at a rollover

HOUSTON (ICIS)–US June contract prices for propylene have fully settled at a rollover, market sources confirmed on Wednesday.

The settlement keeps June contract prices at 38.5 cents/lb ($849/tonne) for polymer-grade propylene (PGP) and at 37.0 cents/lb for chemical-grade propylene, flat from May levels.

The rollover follows volatile movements for contract prices over the last several months.

Early in 2017, US propylene contract prices climbed amid production issues and strong demand. In April and May, contract prices fell as production issues had been resolved and supply recovered.

Part of that supply recovery had been due to turnarounds at multiple derivative plants. Several of those plants restarted in May, another restarted in early June and another restarted last week. Only one derivative plant remains in a turnaround, and that plant is expected to start up later this month.

The supply recovery had been hampered by an outage at a US Gulf propane dehydrogenation (PDH) unit. The unit was shut down in late March for a 60-day turnaround. Market sources had expected the unit to restart in early June, which would have lengthened supply and put downward pressure on contract prices. However the PDH unit had not restarted ahead of the June propylene settlement.

Propylene inventories in recent weeks have been falling, with levels on 2 June down 7.9% from the prior week, according to the most recent data from the US Energy Information Administration (EIA).

Despite the lower inventories, market sources had said propylene supply has been ample due to soft demand from some buyers.

Market sources also expect supply to further lengthen in the coming weeks. 

The US Gulf PDH unit is still expected to restart this month. A new PDH unit in the US Gulf is expected to be fully commissioned at the end of this quarter, with production starting as early as July. A new cracker in the US Gulf is expected to start production in the second half of the year.  

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: Polypropylene (PP) is a major end use of propylene. Source: Sibur