April US propylene contracts settling down 6 cents/lb: sources

Houston (Platts)–10Apr2015/445 pm EDT/2045 GMT

US propylene contract prices for April are settling 6 cents lower, with polymer-grade propylene closing at 43 cents/lb and chemical-grade propylene at 41.5 cents/lb, sources said Friday.

The drop is 5 cents below the initial nomination of a 1-cent/lb increase heard in late March.

If the settlement is accepted marketwide, it would set US propylene contracts to their lowest level since July 2009's prices of 41 and 39.5 cents/lb.

Market expectations in recent weeks called for a 1- to 3-cent drop after spot PGP trading for March hovered below the 43 cents/lb mark on the back of four ongoing downstream polypropylene force majeures.

Recent propylene inventory built-ups, combined with weak energy complex and strong production rates from the petrochemical sector have pushed spot prices lower, sources said. The built up has thus resulted in multi-year lows for refinery-grade and polymer-grade propylene.

In spot markets Friday afternoon, April PGP was in the bid-offer range of 38.5-39.75 cents/lb Mont Belvieu pipeline basis, following one morning deal at 40 cents/lb MtB-pipe, also for April.

Platts assessed US spot RGP at 31.75-32.25 cents/lb delivered on Thursday, a 71-month low, while PGP was assessed on April 2 at 42.25-42.75 cents/lb delivered, itself at a 66-month low.

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. The contract price is generally 2-3 cents above spot PGP prices seen 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.

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