US March propylene contract prices plummet as production recovers from winter storm
US March propylene contracts for the majority of market participants settled at an 18.5 cents/lb ($408/tonne) decrease from February as Gulf Coast production recovered from disruptions caused by mid-February's winter storm.
Coming just one month after the largest-ever month-on-month increase, March's month-on-month decrease is the steepest since 2008.
However, at 70.0 cents/lb for polymer-grade propylene (PGP) and 68.5 cents/lb for chemical-grade propylene (CGP), prices remain well above the three-year averages of around 43.0 cents/lb and 41.5 cents/lb, respectively.
Front-month PGP thus far in March has traded at 53-85 cents/lb, compared with 85-125 cents/lb in February.
US propylene supply continues to loosen as production ramps up following winter-storm related shutdowns; however, market tightness persists due to low inventories and strong demand.
While most propylene-producing plants are back online, operating rates remain below pre-storm levels.
However, accelerating roll-outs of coronavirus vaccines and pent-up demand are expected to amplify Q3's seasonal demand upswing. If this turns out to be the case, the propylene market will get an influx of supply from fluid catalytic cracking (FCC) units.
Demand for most propylene derivatives remains healthy as re-opening economies and a new US stimulus package are spurring consumption of manufactured goods.
The main outlet for propylene is as a feedstock for polypropylene (PP). Propylene is also used to produce acrylonitrile (ACN), propylene oxide (PO), a number of alcohols, cumene and acrylic acid.
Major US propylene producers include Chevron Phillips Chemical, Enterprise Products, ExxonMobil, Flint Hills Resources and Shell Chemical.
