The settlement puts June contract prices for polymer-grade propylene (PGP) at 59.0 cents/lb ($1,301/tonne) and for chemical-grade propylene at 57.5 cents/lb.
The settlement is the second consecutive increase for monthly contracts, following a 5 cent/lb hike in May.
The increases may drive demand destruction as the higher costs may make US propylene derivatives less competitive than imported derivatives.
US June PGP contract prices are above contract prices in Europe and well above spot prices in Asia.
When US propylene prices rose above global prices in early 2018, downstream polypropylene (PP) operating rates fell sharply in January and February as derivative buyers turned to imports and drew down inventories. PP is the largest consumer of propylene in the US.
However, any decline in propylene consumption may be limited by tight supply in downstream PP and the increased shipping time for imports.
"It will depend on how tight PP inventories are," a market source said.
The June contract price increase was largely driven by tight supply as propylene production has been limited from crackers and refineries.
Outages of propane dehydrogenation (PDH) units in late May and early June further tightened supply and pressured spot prices sharply higher.
Most propylene is produced in refineries as a co-product of gasoline. Several refineries or their propylene-producing units have been offline in recent months due to turnarounds and outages.
The second largest source of propylene is from crackers as a co-product of ethylene. Low ethylene prices have limited propylene production due to an increase in the usage of ethane as a feedstock in the recent months. Ethane is the lowest cost cracker feedstock and produces very little propylene.
Propylene inventories have been falling in recent weeks. During June, they have remained below levels from the same month in the prior year, according to data from the US Energy Information Administration (EIA).
Major US propylene producers include Chevron Phillips Chemical, ExxonMobil, Flint Hills Resources and Shell Chemical.
Major buyers include Arkema, Ascend Performance Materials, Braskem, Dow Chemical, INEOS, Oxea and Total.
Focus article by Jessie Waldheim