Propylene Prices Facing Upward Pressure

Houston, TX, Nov. 25, 2009--U.S propylene producers are pushing for a 13% hike on the price of the monomer and the second increase in as many months, according to ICIS.com.

US polymer-grade propylene (PGP) contracts for November settled at 49.50 cents/lb, up by 2.50 cents/lb from October, while chemical-grade propylene (CGP) prices rose by 2.50 cents to 48.00 cents/lb, according to global chemical market intelligence service ICIS pricing.

The proposed increases for December came amid steady demand and higher refinery-grade propylene (RGP) prices in the last three weeks.

Spot RGP has risen by 9.5% since the beginning of November, lifted by tight supply due chiefly to low refinery operating rates in the U.S.

U.S. refineries ran at 79.4% of capacity in the week ended 13 November, down from 79.9% the week before and 84.9% a year earlier, according to latest data from the US Energy Information Administration (EIA).

According to an analyst, ICIS said, this is the first time since 1990, which is as far back as the Department of Energy (DOE) provides weekly data, that refinery rates dipped under the 80% threshold in the month of November.

U.S. refiners have reduced operations in an attempt to bolster profit margins due to weaker products demand, which is off by around 5% or nearly 1m bbl/day from a year ago.

The jump in spot RGP was widely expected to drive propylene contracts higher in December, as the product is the feedstock for around 60% of higher-purity US propylene.

Chevron Phillips Chemical, Enterprise Products, ExxonMobil, LyondellBasell and Shell Chemical are among the major US producers of PGP and CGP. Dow Chemical, INEOS, Ascend Performance Materials and Total are among the main buyers.