North American polypropylene prices have registered a surprising 3 cent-per-pound increase since May 1.
Buyers contacted by Plastics News said the increase was tied in to price hikes for propylene monomer feedstock, which has climbed as oil prices have neared $60 per barrel in recent weeks. Oil prices peaked at $147 per barrel in July 2008, but had been under $60 since November.
Regional PP prices had jumped a total of 9 cents per pound in January and February, but had been flat since then. Prices now have climbed 21 percent in 2009 after falling 35 percent in the second half of 2008.
Propylene monomer also may be under pressure from the gasoline market, where it's sometimes used as a fuel additive. Higher gasoline prices and increased warm-weather driving can move propylene supplies away from the PP market.
One major PP buyer in the Midwest said demand remained “pretty weak” in the first half of 2009. Regional demand had dropped 11 percent during 2008, according to the American Chemistry Council in Arlington, Va.
“Demand really hasn't bounced back yet,” the buyer said. “And the export window had been open, but that might be closing because of higher oil prices.”
Market analyst Joseph Congdon said that he believes the PP market “has found a bottom” after taking a massive tumble in the second half of 2008.
“The last three quarters have been all the same — [PP demand] isn't going down anymore,” said Congdon, who is with the Townsend Solutions consulting firm in Houston. “There's a lot of pent-up demand out there, and some global capacity hasn't come on as expected. There's also some capacity that's still down in China.”
In North America, PP makers have eliminated more than 2 billion pounds of capacity — about 15 percent of the region's total — since early 2007.
That includes recent reductions of 120 million pounds by Flint Hills Resources LP in Odessa, Texas; 400 million pounds by Sunoco Inc. in Bayport, Texas; and 520 million by Ineos Group in La Porte, Texas.
North American PP demand peaked at 19.3 billion pounds in 2007, but fell to 17.2 billion pounds last year — roughly the same level it was at in 2002.