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US December propylene contracts settle down 8 cents/lb

  • Dec.20,2018
  • Source: ICIS News

US December propylene contracts settled at a decrease of 8 cents/lb from the prior month, sources confirmed, amid improved production and a seasonal lull in demand.

The December settlement puts contracts prices for polymer-grade propylene (PGP) at 42.0 cents/lb ($926/tonne) and for chemical-grade propylene (CGP) at 40.5 cents/lb. The December settlement follows a 10 cent/lb decline for November contract prices on similar fundamentals.

US propylene  contract prices

Propylene supplies have been building in recent weeks amid increased production from crackers and refineries and reduced demand from year-end de-stocking. Propylene inventories rose to their highest levels since 2016 in the last week of November, although they fell slightly in the first week of December.

Refinery operating rates fell in September as autumn maintenance was undertaken to transition for winter fuel production. Rates increased during November and remained around 95% in early December.

Propylene production from crackers improved following the restart of a cracker in November. Production also was bolstered by improved economics for heavier feedstocks, which produce more co-products like propylene.

Cracker margins improved as the ethylene market became more balanced and costs for heavier feedstocks fell as upstream crude oil declined. The combination allowed more flexible crackers to increase usage of propane, butane and naphtha feedstocks which produce more co-products.

The increased production and slowed demand has pushed propylene spot prices down about 8-9 cents/lb since early November and down about 20 cents/lb during the third quarter, which also has pressured contract values.

US propylene spot prices

Several more crackers are starting up in the coming months, which may again narrow cracker margins. However, if upstream crude oil costs remain relatively soft then economics for heavier cracker feedstocks may remain workable and propylene production from crackers may remain strong.

Flat-to-weak crude oil values and strong demand for US fuel exports to Mexico will likely encourage strong refinery operating rates in 2019. Refineries produce the majority of propylene in the US.

Propylene demand is expected to rebound early in 2019 as inventories are rebuilt, which could put some upward pressure on January contract values.

US propylene contracts are typically settled in the middle of the month for the current month.

Major US propylene producers include Chevron Phillips Chemical, ExxonMobil, Flint Hills Resources and Shell Chemical.

Major buyers include Arkema, Ascend Performance Materials, Braskem, Dow Chemical, INEOS, Oxea and Total.