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Initial nominations for US October propylene CPs call for 5-cent spike: sources

Initial nominations for US polymer-grade and chemical-grade October propylene contract prices call for a 5-cent increase at 77.5 cents/lb and 76 cents/lb, respectively, market sources said Wednesday.

ExxonMobil Chemical is the only producer with propylene contract nominations announced as yet, sources added.

If the nomination is accepted market-wide, it will put contract prices at their highest since the February 2013 level of 79 cents/lb and 77.5 cents/lb for PGP and CGP, respectively. September contract prices settled at 72.5 cents/lb for polymer-grade and 71 cents/lb for chemical-grade material, both at a rollover from August prices.

Sources said the spike in nominations follows tightly supplied and actively traded markets, which have seen spot polymer-grade and refinery-grade prices reach levels last seen in February 2013.

Talks of the increase started early last week, when buying bids for RGP began climbing 1-2 cents/lb per day, which in turn resulted in higher priced PGP, sources said. A strong refinery-grade propylene market, ongoing steam cracker outages and a propylene supply curtailments contributed to the spike in PGP prices, sources said.

The rise in RGP prices stemmed from refinery output disruptions in the US Gulf Coast in recent weeks and strong gasoline pool demand, sources said. Additionally, stocks of propylene for non-fuel use marked their seventh consecutive weekly decline, dropping 171,000 barrels to 3.122 million barrels in the week ended September 19, US Energy Information Administration data showed Wednesday. Spot RGP was assessed Tuesday at 66.5 cents/lb delivered, the highest since February 28, 2013, when it was assessed at 67.5 cents/lb delivered, Platts data showed. October RGP was last heard bid at 70 cents/lb Mont Belvieu-pipeline and 68 cents/lb delivered via railcar.

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 the spot PGP prices seen at the end of the prior month and the beginning of the month set for negotiations. Additionally, refinery-grade propylene pricing is also considered, as that is the source of a large volume of PGP.

In markets, October PGP was heard offered at 75-77 cents/lb MtB-pipe. September PGP was last heard traded Tuesday at 74.5 cents/lb MtB-pipe, while October was last heard traded late Friday afternoon at 74 cents/lb MtB-pipe. US PGP was last heard trading as high as 74.5 cents/lb MtB-pipe and 75 cents/lb MtB-pipe on February 8, 2013, which was followed four days later by a February PGP contract settlement of 79 cents/lb, a 6 cent/lb month-on-month hike from January 2013.

– Platts.com

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