Initial settlement levels for US June propylene contract prices called for a rollover to 38.5 cents/lb for polymer-grade product and 37 cents/lb for chemical-grade product, market sources said Tuesday.
The settlement, if accepted on a market-wide basis, is within market expectations, which recently called for a decrease of 1 cent to an increase of 1 cent/lb, sources said.
Multiple propylene market participants -- including three buyers and one trader -- confirmed the initial settlements at that level.
The rollover comes as spot PGP hovered closely around 37 cents/lb FD USG from mid-May to mid-June, according S&P Global Platts data.
Market participants originally expected a decrease of 1 to 2 cents amid expectations that propylene will see additional length in the market, with sources awaiting the restart of Flint Hills Resources' propane dehydrogenation plant in Houston, Texas, sources said. The 545,000 mt/year plant began a 60-day turnaround in early April and was expected to restart in early June, sources said.
However, delays in the restart of the PDH unit combined with strong downstream demand quickly turned bearish sentiment bullish, with sources then saying that an increase in June contracts could be possible.
Downstream polypropylene demand was talked exceptionally strong recently, with PP producers heard ramping up production rates after a two-month lull, sources said. "People [in the PP market] don't just want to buy what they need, they want to buy 20%-50% more," a PP producer said, adding that orders for June are already sold out.
Furthermore, US stocks of propylene for non-fuel use fell for the third consecutive reporting period, Energy Information Administration data showed June 7. Propylene inventories saw a draw of 239,000 barrels, or 7.88%, to 2.794 million barrels in the week that ended June 2, the data showed. Across the US, refinery run rates last week fell 0.9 percentage point to 94.1%, the EIA data showed.
US spot polymer-grade propylene was assessed Tuesday at 37.5-38 cents/lb FD USG for prompt-month deliveries and at 37-37.5 cents/lb FD USG for forward-month deliveries.
Refinery-grade product on a three- to 30-day basis was assessed Tuesday at 23.75-24.25 cents/lb FD USG delivered.
The PGP contract price is generally 2-3 cents above spot PGP prices at the end of the prior month and the beginning of the new month. Refinery-grade propylene pricing is also considered in the formula because it is a large source of PGP.
US propylene contract prices are settled on a monthly basis between major producers and buyers. The process includes price nominations by producers and subsequent negotiations with customers.
