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September 03, 2020 09:06 AM

‘Super tight' supplies hitting PP prices as cleanup continues from Laura

Frank Esposito
Senior Staff Reporter
Plastics News Staff
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    U.S. Coast Guard Seaman Gabriel Wisdom

    The crew of Coast Guard Cutter Hatchet repairs a light in the Sabine-Neches Canal in Sabine, Texas, after discovering the tower toppled over following Hurricane Laura. 

    North American polypropylene prices remained heated as summer came to an end.

    PP prices increased by an average of 4 cents per pound in August. Prices had jumped 6 cents in July and 1 cent in June. Three consecutive summer price increases are rare for the PP market, based on previous pricing activity.

    September could see prices move even higher, with some capacity on the U.S. Gulf coast out of commission after Hurricane Laura struck the region.

    "The market was tight to begin with," said Scott Newell, a market analyst with Resin Technology Inc. in Fort Worth, Texas. "Even if those Gulf Coast plants are only down for a few days, that could make the market even tighter.

    "The market just feels super tight right now. Buyers are trying to find out where their rail cars are at," Newell said.

    Market sources said that PP market leader LyondellBasell Industries had placed force majeure sales limits on PP, but a company spokesperson declined to confirm that move. The firm operates almost 3 billion pounds of PP capacity in Lake Charles, La., an area that was hard-hit when Hurricane Laura made land on Aug. 26. Sources said that capacity remained down as of Sept. 2.

    A Sept. 2 letter from LyondellBasell to customers said that its Lake Charles operations "have sustained damages." Officials added in the letter that "basic transport in the area has been impacted," including rail and barge traffic.

    An Aug. 28 statement from LyondellBasell said that most of its its Houston-area facilities "had returned to pre-storm conditions" but gave no details for Lake Charles.

    Sources added that LyondellBasell had restarted almost 4 billion pounds of PP capacity in Bayport, Texas, that had been taken down ahead of the storm. Separate from the hurricane, Formosa Plastics Corp. USA in early August placed force majeure sales limits on PP made at its plant in Point Comfort, Texas.

    Higher monomer prices

    Sources said that most of the August price hike was tied to higher prices for propylene-grade monomer feedstock, but some of it also went toward margin improvement. PP makers are seeking more margin improvement on top of any change in monomer pricing for September as well, they added.

    Regional PP demand had been hurt by the COVID-19 pandemic but has been improving in recent months, RTI's Newell said.

    "Some markets are coming back after having a tough time with demand down because of COVID in April and May," he added.

    North American PP supplies "remain extremely tight with very strong demand from consumers," officials with distributor/consultant Blue Clover Polymer Solutions in Princeton, N.J., said in a recent research note.

    They added that producers with full production capacity — not counting LyondellBasell and Formosa — "describe an environment by which customers are maximizing contract volumes and asking for more on top. This is leaving very little product for the spot and export markets."

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