Weakening propylene spot values could reverse the price uptrend

US propylene contracts for April rose by US$154/ton, marking the sixth monthly increase in prices by 53% since November 2009 on the back of tight supply. US propylene production in 2009 totalled 29.3 bln lb, down by 10% from 32.6 bln lb the previous year, according to data from the National Petrochemical & Refiners Association (NPRA). USA currently has the most expensive propylene in the world. As per ICIS, the 10% jump is in line with projections - some market participants had predicted a hike of 6-8 cents/lb, even though producers had nominated increases of 11 and 12 cents/lb. However, spot values have started to weaken, suggesting stability in May or even a possible reversal in the uptrend. This reversal is triggered by easing of supplies on higher refinery operating rates at 82.6% capacity in the week ended 26 March, up from 81.1% in the previous week, according to the US Energy Information Administration (EIA). Another factor that could influence US propylene in the coming months is the start-up by Petrologistics of a propane dehydrogenation (PDH) plant at the end of July, planned to produce CGP and PGP, adding some 544,000 tpa capacity to the market.
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