Larger increase in February propylene contracts expected

20-Feb-15

Expectations of a small increase for February propylene contracts have given way to expectations of a larger increase, although no settlements were reached as of Wednesday, as per ICIS. Sources said talks for the February increase are in the 1.5-3.0 cent/lb (US$33-66/ton) level, tracking higher spot prices for polymer-grade propylene (PGP) in recent weeks. Since the January settlement, spot PGP prices have risen from the mid-40s cents/lb to the upper-40s cents/lb, although they have started to trend lower. Several propylene buyers said the run-up in spot PGP was not driven by consumers, and that an increase in propylene contracts would cause demand destruction, especially for polypropylene (PP). Demand for PP exports has been hit hard by weaker global energy markets, as buyers have retreated to wait for a floor to emerge. Before crude oil rebounded, however, US propylene prices were climbing on expectations of tighter supply.