Houston — August propylene contract settlements have begun with increases of 2 cents/lb ($44/mt), trade participants said on Tuesday. The initial increases were above the July polymer-grade propylene contract price of 59 cents/lb ($1,300/mt) and the July chemical-grade propylene contract price of 57 cents/lb ($1,256/mt), and were in line with market expectations that the August contracts could see a rollover or an increase as high as 3 cents/lb over July.
The increase was mostly attributed to a higher 45-day weighted average of PGP prices, according to market sources. Trade sources also pointed to stronger feedstock propane costs, some short-lived production issues with propane dehydrogenation units and a potential risk to operations and supply with the US still in the middle of hurricane season. Non-LST propane closed on Monday at 101.50 cents/gal, its highest level since October 2014, according to S&P Global Platts data.
Despite a higher 45-day weighted average, domestic supply has been increasing over the past seven weeks, according to the Energy Information Administration, and PGP spot prices have seen a gradual decline during August. Trade sources have said PGP supply is healthy but it does not necessarily mean supply is readily available for the spot market, as US propylene is still being exported at high volumes. Prompt PGP was assessed at 56.652 cents/lb FD USG on Monday, down 4.375 cents from a month earlier.
Additional August propylene contract settlements are expected this week. Should August be accepted at a marketwide increase of 2 cents/lb, it would take the PGP contract up to 61 cents/lb and the CGP contract up to 59 cents/lb.
The PGP contract price is generally 2-3 cents above the spot PGP price at the end of the previous month and the beginning of the new month. RGP pricing is also considered in the formula because it is a large source of PGP.
US propylene contract prices are settled on a monthly basis between major producers and buyers. The process includes price nominations by producers and subsequent negotiations with customers.
–Brian Balboa, firstname.lastname@example.org
–Edited by Jennifer Pedrick, email@example.com