AFPM ’19: US PP market faces lengthy supply in 2019

HOUSTON (ICIS)–The US polypropylene (PP) market is facing supply length in 2019 following a year of persistent tightness in supply during 2018 heading into this year’s International Petrochemical Conference (IPC).

US PP supply was tight throughout most of 2018 as propylene monomer availability was limited while several plants experienced unanticipated production problems.

This resulted in significant volatility in PP prices, with contract prices rising or falling by at least 5 cents/lb ($110/tonne) in seven of the twelve months of 2018.

2019 has opened with price volatility giving way to months of consecutive price decreases. No major plant outages have been seen thus far while production capacity rose across the industry as a result of debottlenecking projects completed in 2018.

Monomer supply has also lengthened significantly, with propylene inventories hitting record highs early in 2019, according to data from the US Energy Information Administration (EIA).

These factors have caused contract prices to decline by a cumulative amount of 22 cents/lb ($485/tonne) between the months of November and February.

The US position in global PP trade has also shifted with the change in US production and inventory levels.

US PP exports plunged by more than 30% in 2018 due to production shortfalls as well as unfavourable arbitrages between the US and other global regions, according to data from the American Chemistry Council (ACC) and Vault Consulting

Imports of PP to the US rose during 2018 as high prices for domestic material encouraged many buyers to include a greater variety of overseas material in their product mix.

2019 has seen a steep drop in import purchases as domestic product is now competitive versus material from other regions while exports have also been growing as producers seek fresh outlets for their production.

Exports have primarily focused on nearby countries such as Mexico, which is accessible by bulk truck from the US, although more sellers are currently seeking deepwater destinations as they seek to pare down inventories.

Major US PP producers include Braskem, ExxonMobil, Formosa, INEOS, LyondellBasell, Phillips 66 and Total Petrochemicals.

Hosted by the American Fuel & Petrochemical Manufacturers (AFPM), the IPC takes place on 24-26 March in San Antonio, Texas.

Focus article by Zachary Moore