North American polypropylene producers need margin expansions of 6-8 cents/lb ($132-$176/mt) in domestic pricing to justify investing in additional capacity, market sources said Tuesday on the sidelines of the National Plastics Exposition in Orlando, Florida.
“Without improved [margins], there is no case to present to the board,” a source with a major producer said.
Unlike polyethylene, which could see 5 million-7 million mt/year of additional capacity over the next 2-5 years in the US on the back of the shale gas boom, polypropylene producers have announced no major expansions to date.
That is despite projects underway to increase production of propylene, the main feedstock for production of the resin, by more than 3.5 million mt/year during that span.
At least one US-based producer is considering additional PP capacity, sources have indicated; however, the company has yet to make an announcement.
A majority of domestic polypropylene prices are tied to polymer-grade propylene contract pricing, using what the industry describes as monomer-plus formulas that place a premium of 12-14 cents/lb over the PGP price.
Over the past two-plus years, however, producers have pushed for additional increases independent of PGP movement, citing increased demand against shrinking capacity and tight availability.
As recently as January, producers were successful in expanding domestic contract price margins by 2 cents/lb and some by 3 cents/lb, and market sources with two major distributors said producers will push for an additional 2 cents/lb as soon as April, citing tightness.
Platts assessed March contract pricing for homopolymer injection polypropylene at 61-62 cents/lb delivered rail car. The March PGP contract price settled at 49 cents/lb delivered.
Spot homopolymer injection PP for export was assessed Tuesday at $1,455-$1,477/mt (66-67 cents/lb) FAS Houston.
– Platts.com
