The Urethane Blog

More Propylene Capacity Imminent

US May PP contracts decrease further on lower feedstock costs

25 May 2017 22:51 Source:ICIS News

US May PP contracts decrease further on lower feedstock costsFocus story by Lane Kelley

HOUSTON (ICIS)–US May polypropylene (PP) contracts dropped by 7.5 cents/lb following upstream propylene, marking the 10th straight month that the polymer has followed the feedstock.

The May price cut puts PP block co-polymer at 57.5-61.50 cents/lb ($1,268-1,356/tonne) from 65.0-69.0 previously.

The drop leaves PP contracts still up by 7 cents/lb for the year, though market sources say expectations of another drop in June seem like a longshot at this point.A popular opinion during the second quarter this year has been that the 20.5 cents/lb that PP contracts gained in the first quarter would come out in the second quarter, because of propylene units restarting after turnarounds in the first quarter.

A 6 cent/lb reduction in April PP contracts and the drop for May still left some buyers hoping for a 6-7 cent/lb price cut in June to make things even for the year.

A producer doubted that will happen, though, considering that polymer-grade (PGP) propylene spot prices have ticked higher this week. The edge up has been only a half-cent on bids, with no trades or offers, but one market watcher said PGP could move higher if it trades.

The PP producer said converters are low on inventory now because they are waiting for a drop in June.

But the producer expects an uptick in demand during June because of buying ahead of the new Enterprise propane dehydrogenation (PDH) unit start-up, said by some to be in July.

The 1.65bn lb/year unit will put a lot of new propylene in the market and cause prices to drop, the producer said.

“Even if they only come up 50%, it will be significant,” the producer added.