US spot propylene at 13-month high amid outages, inventory draw
Houston (Platts)–12 Aug 2016 510 pm EDT/2110 GMT
US refinery grade propylene traded at a 13-month high of 24.25 cents/lb Thursday amid talk of production outages, a refinery fire and continued drawdown of inventories.
The trade was the highest since July 10, 2015, when trading levels were assessed at 24.25-24.75 cents/lb FD USG, S&P Global Platts data showed.
The Thursday trade was 0.75 cents/lb higher than Wednesday’s trading level, itself a 13-month high.
The latest uptick followed a fire at Motiva’s Convent refinery in Louisiana. The plant was evacuated after a large fire in a hydroprocessing unit, a source familiar with refinery operations said.
The fire at the 235,000 b/d refinery forced the evacuation of all employees and contractors from the plant, a spokeswoman for the St. James Parish Sheriff’s Office said.
US propylene production has been hit by a string of unplanned outages, starting in mid-May with Dow Chemical shutting its 750,000 mt/year propane dehydrogenation plant — the second in the Americas.
In early June, Flint Hills Resources shut its 545,000 mt/year PDH plant — the first in the Americas — for planned maintenance.
In addition, Dow’s polymer-grade propylene plant was shut again for maintenance in mid-July, six days after it was restarted.
Also in early June, a slew of unplanned refinery outages trimmed propylene output and started the draw of inventories for non-fuel use.
US EIA data showed non-fuel use inventories ended May at close to 3.9 million barrels and has since fallen to the current level of 2.6 million barrels, the lowest since the week of October 31, 2014.
The tightness has spread to PGP, which was last traded Wednesday at 35.75 cents/lb, and was subsequently bid Thursday at that level.
Thursday’s assessment at 36.25 cents/lb FD USG was the highest since June 19, 2015, when it was 37.75 cent/lb FD USG, Platts data showed.
Expectations of much higher growth were tempered by downstream US polypropylene spot rail car prices in the low 40s cents/lb, sources said.
The PGP to PP margin has been squeezed from 30 cents/lb at the start of 2016 to the current 5 cents/lb by a flood of imports and strong run rates.
Even though upward momentum in PP pricing and a cut in PP production rates was somewhat expected — rates have hovered around 92.5% for the past 18 months, up 4-5% from 2014 — the threat of cheap PP imports in Q4 remains, which is likely to put a lid on any jump in propylene prices.
–Pavel Pavlov, firstname.lastname@example.org
–Edited by Wendy Wells, email@example.com