Prices level off for now
By Staff -- Purchasing, 5/7/1998
Domestic propylene and polypro-pylene prices have been declining but will begin to level off in the coming months. Excess availability has been driving the decline in domestic propylene tags. In the fourth quarter, propylene demand slowed, because consumption of propylene derivatives was suppressed by high polymer inventories, reduced exports, and an anticipated slowdown in seasonal demand for products such as phenol, according to The Pace Consultants, Houston, Texas. Now, domestic demand is beginning to heat up, which is helping to reduce inventories.This will help curb the downward pressure on tags. U.S. propylene tags began to decline in November from a high of 19(cent)/lb. The average U.S. bulk price slipped to an average of 18(cent)/lb in the fourth quarter. In the first quarter, tags were down to an average of 16(cent)/lb. Buyers forecast that contracts will bottom out at 15(cent)/lb in this quarter and remain at that level through year-end.
Slowing demand for polypropylene began to eat into prices for this resin early in 1997. U.S. bulk prices averaged 42(cent)/lb for contracts and 39(cent)/lb for spot purchases in the fourth quarter. Tags slowly drifted down to 40(cent)/lb in the third quarter. After that, the downward momentum accelerated because of the added factor of falling propylene costs. In the first quarter, prices were down to 35(cent)/lb for contracts and 33(cent)/lb for spot purchases. Contracts slipped to 35(cent)/lb, and spot purchases were down to 32(cent)/lb in March. Buyers predict these tags will slide another 1(cent)-2(cent)/lb during the next six months.
Buyers point to availability as the primary reason for the weak poly-propylene prices. "In general, availability of supply exceeds demand," says a polypropylene buyer in the Southwest. "Some additional capacity is being added, which is driving several producers to sell product aggressively to hold onto marketshare." The buyer adds that polypropylene imports also are capturing a share of the domestic market.
Propylene capacity aslo is rising, which could put a damper on prices for propylene and polypropylene in the future. Currently, about half of domestic propylene production comes from olefins plants. Most of these facilities produce one-third of a pound of propylene for every pound of ethylene produced. A number of these producers are expanding capacity.
In 1997, Eastman Chemical expanded its Longview, Texas, plant by 60 million lb/yr of propylene capacity. Millennium, now part of a joint venture called Equistar, recently boosted the capacity of its Clinton, Iowa, olefins production facility by 90 million lb/yr.
Union Carbide modernized its olefins production unit in Taft, La., in 1997. The project was expected to increase the unit's effective capacity by nearly 700 million lb/yr to 2.2 billion lb/yr.
Also in 1997, Exxon started up its 1.54 billion lb/yr ethylene plant at its Baytown, Texas, olefins production site. Marathon Oil and Epsilon Products Co. are developing propylene and polypropylene facilities in Grayville, La. Marathon will build purification facilities which will produce 800 million lb/yr of polymer-grade propylene. Epsilon will build an 800 million lb/yr polypropylene facility. Both will be operating by third-quarter 1999.
Amoco Corp. will evaluate the possibility of constructing an ethylene/propylene/polypropylene unit in the Midwest. The facility would have the capacity to produce 35,000 ton/yr of ethylene, 450,000 ton/yr of polymer-grade propylene, and 270,000 ton/yr of polypropylene. Start-up date is estimated to be in 2002.
In other propylene and polypropylene supplier news, Westlake Group recently acquired B.F. Goodrich's chlor-alkali and olefins facilities in Calvert City, Ky. This includes 130 million lb/yr of propylene capacity. In addition, Occidental Chemical is merging its petrochemical business into Equistar Chemicals, a joint venture including petrochemical businesses from Millennium and Lyondell.
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