Tracking continued tight supply and steady demand, US October propylene contracts are expected to climb, as per sources in ICIS. Sources said various producers have separately nominated October propylene contracts for an increase of 3 cents/lb (US$66/ton), 5 cents/lb and a re-nomination of 8 cents/lb. September polymer-grade propylene (PGP) contracts settled at 72.5 cents/lb while chemical-grade propylene (CGP) contracts were at 71.0 cents/lb. Spot PGP prices have climbed to the 74-75 cents/lb level based on recent trading, sources said, although some higher trades were heard, but these could not be verified. US propylene contracts typically settle 2-3 cents/lb higher than recent spot activity.
A US buyer said it expects the original nomination of 5 cents/lb to find traction, especially as pressure is easing from feedstock refinery-grade propylene (RGP) prices. Spot RGP bids had climbed as high as the mid-70s cents/lb in early October, against no bids. This would have pushed propylene producers with propylene splitters, which use RGP as a feedstock to produce PGP, to seek October PGP contracts above 80 cents/lb.
This is because the margin between RGP and PGP is typically at least 6-8 cents/lb, and has been above 10 cents/lb for most of the year. However, the high prices for RGP were mostly driven by tight supply, leaving PGP buyers unlikely to be willing to absorb the costs. With RGP bids falling to around 70 cents/lb, a contract PGP price in the high-70s cents/lb could stick.
Sources said overall propylene supply is tight because of several refinery issues and several US crackers being down. There are concerns that the high propylene prices have caused demand destruction, but sources said inventory levels along the chain are low, necessitating some purchasing. Major US propylene producers include Chevron Phillips Chemical, Enterprise Products, ExxonMobil, LyondellBasell and Shell Chemical.
09-Oct-14 
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