The initial settlement for US July contract prices for chemical-grade propylene and for polymer-grade propylene called for a 0.5 cent/lb hike to 32 cents/lb and 33.5 cents/lb, respectively, sources said Wednesday.

The settlement, if accepted on a market-wide basis, is above the latest nomination of a rollover and would be the second increase in as many months.

Additionally, the settlement would put contract prices at their highest level since July 2015’s CGP and PGP contract prices of 35 cents/lb and 36.5 cents/lb, respectively.

Sources cited the unplanned outage at Dow Chemical’s propane dehydrogenation unit in mid-July as the primary factor behind the higher spot and contract pricing.

The plant was last restarted in late June and was operational for about three weeks. The plant started operations in December and was successfully commissioned in early March. In late March, Dow started planned maintenance that was completed by May 6 and involved repairs to an exchanger.

Additionally, the increase follows a rise in refinery-grade prices, which started the month at 20.25 cents/lb and reached 20.75 cents/lb on Tuesday amid reduced inventories, which totaled 3.163 million barrels in the week that ended July 15, US Energy Information Administration data showed Wednesday.

The drop in inventories followed higher refinery run rates, which were near an eight-month high at 93.2% for the week, the EIA data show.

US polymer-grade propylene was assessed Wednesday at 31.25-31.75 cents/lb FD USG, up 0.25 cent/lb day on day for both July and August deliveries. RGP was assessed at 20.5-21 cents/lb delivered.

The contract price is generally 2-3 cents above spot PGP prices at the end of the prior month and the beginning of the new month. Refinery-grade propylene pricing is also considered in the formula, because it is a large source of PGP.

US propylene contracts are settled on a monthly basis between major producers and buyers. The process includes price nominations by producers and subsequent negotiations with customers.

–Pavel Pavlov, pavel.pavlov@spglobal.com
–Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com

http://www.platts.com/latest-news/petrochemicals/houston/initial-july-us-propylene-cp-settlements-call-26497365