Polypropylene Up 3 Cents, Double-digit Increase on the Horizon

The 3-cent price increase that hit the North American polypropylene market in December is looking like the calm before the storm -- since an increase of as much as 20 cents per pound is bearing down on buyers for January.

Both moves are the result of a series of unplanned outages that hit propylene production sites throughout the U.S. Gulf Coast beginning in late November. Most recently, Dow Chemical Co.’s St. Charles plant in Hahnville, La., has experienced production problems for propylene, polyethylene and related products because of a Jan. 3 electrical outage.

Startup problems at a propylene site run by new firm PetroLogistics in the Houston area have added to propylene tightness, or at least to that perception. Although the site — a former ExxonMobil Chemical facility — would have added less than 5 percent to the region’s total propylene supply, it was expected to alleviate some of the supply pressure experienced by existing propylene makers. PetroLogistics now is expected to resume production by the end of the month.

And a longer-term factor affecting propylene supply — and, as a result, regional PP prices — is continued use of lower-priced natural gas as a petrochemical feedstock over crude oil. The ethane derived from natural gas produces less propylene than crude oil-based naphtha does, but the economics of the situation means that a switch back to crude is unlikely.

As a result, the regional PP market is looking at an extended period of tight propylene supplies.

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