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Propylene Prices Continue to Climb Higher
November 09, 2023
Propylene prices continue to climb higher though Polypropylene producers keep pumping out resin...for now.
Ongoing production outages, including the Enterprise PDH # 2, unit has left the industry short of Propylene monomer. These issues has triggered a steep rally in Polymer Grade Propylene (PGP) prices as values have soared from a low of $.31/lb in late August up to $.505/lb by Nov 8th. Most PGP monomer is used in the production of Polypropylene resins, but there are other uses as well, in fact it was Propylene Oxide demand that just helped breach the $.50/lb level.
Most Polypropylene producers seem undeterred by their rising costs which rose $.085/lb in Sep/Oct to $.43/lb and are clearly going higher in Nov. Resin sales contracts are generally tied to the cost of PGP monomer plus some negotiated premium, which has recently been between $.15-.25/lb depending on the type of resin and annual volumes, so the rising costs are passed through downstream.
As such, preliminary results released by the American Chemistry Council indicate that although resin producers ran their reactors below 80% of total capacity, they still made nearly 1.5 billion lbs of Polypropylene in October, which was almost 6% above the trailing 12 month average. PP exports in Oct ran exactly at the 12 month average, while domestic sales were 3% above the 12 month average. Altogether, this yielded a modest 1.6% build in producers' collective PP inventories, bringing them right back to the level where 2023 began, which are considered balanced to snug.
PGP monomer prices could see some relief ahead as the Enterprise PDH #2 unit is expected to return back to production around the end of November, though history has shown that bringing a PDH unit back to consistent production can be a challenge. In addition to the recent announcement by Braskem to take one of their Polypropylene reactors in Marcus Hook, PA offline, with annual capacity of 450 million pounds, more PP production capacity is now being curtailed.
Total Energies announced this week that they will reduce the production of Polypropylene at their LaPorte, TX facility with annual capacity of nearly 2.7 billion pounds. While Total did not specifically cite the reason for the reduced production, PGP costs and availability likely played a big role as Total has lost their own PGP production for an indefinite period of time. The BASF/Total Energies heavy cracker and Metathesis unit in Port Arthur, TX, with joint annual Propylene capacity of 1.9 billion pounds, has been offline since early September due to a fire with no restart date known.
Reduced resin production will limit PGP monomer demand, but will also tighten up PP resin supplies, so the net effect on resin prices is still to be determined. In addition, there are PDH and Refinery turnarounds planned for the first quarter of 2024, leaving very little room if any for additional production hiccups. Stay tuned, the next few months will be interesting indeed.
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