Market and product
US October propylene contracts expected to fall slightly
HOUSTON (ICIS)--US October propylene contracts are expected to fall slightly on weakening demand and lower spot prices, sources said on Wednesday.
Buyers and sellers said that two major US producers have nominated October contracts to fall by 1 cent/lb ($22/tonne, €16/tonne).
This would put US October polymer-grade propylene (PGP) contracts at 69.0 cents/lb and October chemical-grade propylene (CGP) contracts at 67.5 cents/lb.
However, a downturn in spot pricing on Tuesday could lead to lower settlements, source said.
US front-month PGP traded twice at 65.0 cents/lb and once at 64.5 cents/lb on Tuesday, which surprised some market players.
“Demand is still steady, and supply is not long,” a producer said. “I don’t see a reason for prices to be falling.”
US propylene contracts often settle 2-3 cents/lb above the most recent spot PGP trade, which was the two deals done at 65 cents/lb.
The drop in spot PGP also narrowed the gap between it and refinery-grade propylene (RGP), which can be used as a feedstock.
RGP bid levels fell to 54 cents/lb on Tuesday, but a buyer said that price was too low and that deals would be done in the 57-58 cents/lb range.
Sources said the gap between RGP and PGP contracts needs to be at 6-7 cents/lb at a minimum but that producers are pushing for a 10 cent/lb or higher gap to restore margins.
US propylene contracts typically settle in the first half of the month for that month.
Major US propylene producers include Chevron Phillips Chemical, ExxonMobil, LyondellBasell, PetroLogistics and Shell Chemical.
Major buyers include Ascend Performance Materials, Dow Chemical, INEOS and Total.
($1 = €0.74)
