Polypro Market Update

16 Aug


Polypropylene Market Update in North America, August 6, 2007 (7-8-2007)

Volume: Lighter
Price: Higher
The Polypropylene market moved higher this past week, as we saw solid spot demand competing for a lighter than average flow of good widespec resin. Generic Prime railcars were offered, but not aggressively, and the prices shown were $.02-.03/lb higher than July. With just a penny secured for July resin contracts, and August monomer contracts having already settled $.0175/lb higher, resin producers are exerting upward pressure on the resin market by raising spot asking prices.

With RBOB Futures falling more than a nickel this past week (and more than 15% in the past few weeks), alkylation values have dropped, tilting more in favor of additional Polymer Grade Propylene (PGP) production. While it is not an automatic switch, the relative values contribute to refiners’ decisions to convert marginal RGP lbs to either gasoline octane enhancer or PGP. With Propylene prices still high and RBOB prices falling, refiners can now get more value by making PGP.

This is a critical fundamental to watch, because it has been the high gasoline prices, fueled by restricted refinery capacity that has diverted RGP monomer away from PGP production, driving Propylene monomer prices higher. The rising monomer costs have been systematically passed through to Polypropylene resin contracts. While high costs are certainly a challenge for resin producers, it has been a particularly difficult situation for resin buyers whose demand has waned since many of their applications do not support Polypropylene prices into the $.60s/lb.

Now that refinery rates have increased past the 5-year average, and driving is past the peak of the peak season, it seems that both the RBOB and monomer markets could be lining up for a break similar to which we have seen in recent years. This could be good news for the health of the domestic Polypropylene market, that can use lower costs and resin prices; however, strong exports might continue to get in the way. High European resins prices and a weak US dollar, have encouraged awesome export sales, which have more than offset the drop in domestic demand.

When European traders return from summer holidays, it will be interesting to see if they re-enter the US resin market armed with sizable purchase orders. If so, the domestic Polypropylene market can have legs for a while, supported by this alternative resin demand, perhaps even if we do see a top potentially developing in the Propylene monomer market.
(The Plastics Exchange)

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Posted by on August 16, 2007 in Industrial Plastics, The Business


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