US Feb propylene trends toward hike on tighter supply
HOUSTON (ICIS)–US February propylene contracts were trending toward an increase on the back of expected tighter supply and higher crude oil, sources said on Wednesday.
US February polymer-grade propylene (PGP) and chemical-grade propylene (CGP) contracts were separately nominated for increases of 1.0 cents/lb ($22/tonne) and 1.5 cents/lb from two producers.
With two front-month spot trades done the previous day at 48 cents/lb and 49 cents/lb, those nominations look more likely to find traction.
US propylene contracts typically settle 2-3 cents/lb above recent spot trading levels in the first half of the month for that month.
January PGP contracts settled 49.5 cents/lb and January CGP contracts settled at 48.0 cents/lb.
US propylene spot prices have risen 1-2 cents/lb since the January settlement, tracking tighter supply and expectations that feedstock costs would start to increase.
The supply tightness stems from several announced refinery turnarounds, as low energy values have weakened margins on gasoline production, leading to less available refinery-grade propylene (RGP).
The decline in RGP availability means less PGP from propylene splitters, and RGP sellers retreated in late January to wait for prices to rebound.
Since hitting a floor around 33-36 cents/lb, spot RGP prices have risen to the 38-39 cent/lb level, although material remains thin.
A recent rebound in crude oil has also pushed propylene sellers to hold out for higher prices and the possibility of increased demand abroad for US propylene derivatives.
Major US propylene producers include Chevron Phillips Chemical, Enterprise Products, ExxonMobil, LyondellBasell and Shell Chemical.
Major buyers include Ascend Performance Materials, Braskem, Dow Chemical, INEOS and Total.
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