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Polypropylene price increase tied to propylene mononer tightness

By: Frank Esposito

October 11, 2012

AKRON, OHIO (Oct. 11, 1:45 p.m. ET) — After several price declines, North American polypropylene prices managed to tick up an average of 1 cent per pound in September.

Buyers contacted by Plastics News said the increase was tied to a change in price for propylene monomer feedstock. Regional PP prices had tumbled an average of 27 cents per pound since May, after climbing an average of 22 cents per pound in the first four months of the year.

The September increase means that regional PP prices now are down a net of 4 cents per pound since January – an overall decline of about 4 percent for the year to date, based on price of homopolymer grades of PP used in injection molding.

A U.S. West Coast-based PP buyer said recent high gasoline prices may have caused tightness in the propylene market, since propylene can be used as a gasoline additive. Higher gasoline prices could have convinced propylene makers to sell into that market rather than into PP. The resulting tightness would have helped push the September PP increase through, the West Coast buyer said.

Propylene monomer prices already have settled up 1.5 cents per pound for October, which could lead to another PP price increase as well. Some PP buyers said they expected further price increases through the end of the year, but Scott Newell, a PP market analyst with Resin Technology Inc. in Fort Worth, Texas, said he wouldn’t be surprised if market prices remained flat during that period.

Overall, prices could be “in line with the price levels we’ve had now for five months,” Newell added.

One PP buyer in the U.S. Midwest went against the grain by saying he expected a couple of cents worth of price erosion by the end of the year.

“Demand is not strong,” the Midwest buyer said. “It only appears that way due to pre-buys.”

Through July, U.S./Canadian PP sales were up 3.3 percent, according to the American Chemistry Council in Washington. Domestic sales growth of 5 percent was dampened by a drop of more than 20 percent in export sales.

Among domestic PP end markets, injection molded cups and containers led the way through July with sales growth of more than 22 percent vs. the year-ago period, according to ACC. Regional sales into transportation-based PP injection molding also grew almost five percent in that span.

PP sales in the region to resellers, distributors and compounders also grew almost 16 percent through July, according to ACC. Of those three sectors, resellers posted the highest growth rate, checking in at more than 18 percent.

Last year’s U.S./Canadian PP sales total of 16.4 billion pounds was the lowest of the five-year period between 2007-11, and was 15 percent below the market’s 2007 sales total of 19.3 billion pounds.