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Polypropylene Market Update in North America, August 13, 2007

https://www.chemnet.com   Aug 15,2007 The Plastics Exchange
Volume: Good
Price: Mostly Steady
In very early August Generic Prime Polypropylene offers were shown to the market priced $.03 - .04/lb higher than in July. This reflected producers' intent to raise prices for August resin contracts since feedstocks were again on the rise. Buyers however, have struggled with the price and these offers had not received too much attention. August monomer contracts have now settled $.0175/lb higher, so we now expect resin contracts to also settle $.015 - $.02/lb higher.
Spot Polypropylene offers eased about a penny this week as producers showed signs of negotiating off their $.04/lb target increase for August pricing. Even with offers now coming off a little, Polypropylene supplies have been kept in check, and we would not consider the market over-supplied. There has been a steady flow of good offgrade that has been priced at a nice discount to Prime contracts; this resin has sold well. Buyers in need of resin are just looking to save money where they can.

This has been a market grudgingly pushed higher by rising feedstock costs. During this time, margins have essentially held steady as resin contracts have increased in almost perfect tandem with monomer contracts. All of this year's price increases have really only offset a commensurate rise in feedstock costs.

Strong Crude Oil and Gasoline prices have diverted potential supplies away from Polymer Grade Propylene production; however, this has recently begun to unwind. Crude Oil prices have quickly corrected nearly 10%. This, coupled with falling RBOB prices, should in theory begin to free up more monomer supplies and help ease costs, as refinery issues continue to resolve.

Although export demand has stepped up to more than offset the drop in domestic demand, it appears unlikely that it will be enough to assist producers to gain their full increase in August. In order to record their first meaningful margin increase in 2007, producers might need to wait for monomer prices to really give way and then only to share in the cost savings downstream. While it appears that the cost relief may have begun (at least so far in spot monomer), renewed fears of hurricanes in the gulf this season promise to keep us all on our toes.
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