Additional May propylene contacts settlements have emerged at increases of 5 cents/lb, as some buyers and sellers are trying to renegotiate contracts following an initial settlement earlier in the week, with talk that a split settlement was not out of the question, market sources said Friday.
The 5 cents/lb settlement, if accepted marketwide, would push polymer-grade propylene contracts up to 51 cents/lb. But, chemical-grade propylene buyers and sellers are still looking to renegotiate for a 5 cents/lb increase. Should a 5 cents/lb increase pass through for CGP, it would take the contract price up to 49.50 cents/lb.
An initial US May propylene contract settlement was heard Tuesday at a 4 cents/lb increase, which was in line with more recent expectations that contracts would increase 2-4 cents/lb.
Sources have said one CGP buyer and seller agreed to a 4 cents/lb increase, and at least one CGP buyer and seller were in agreement to settle at a 5 cents/lb increase.
One polypropylene market participant said there was even a seller that was holding out for a 6 cents/lb increase for CGP and that prevailing sentiment was likely for a split settlement of 4.50 cents/lb and with the 45-day weighted average also having some influence that could support a 4 cents/lb settlement.
Either way, an increase for propylene contracts would be the first since February 2018, according to S&P Global Platts data.
The contract increases comes amid higher spot pricing over the past month, driven by tighter availability and stronger demand from downstream polypropylene producers.
The spot Platts prompt-month PGP assessment surpassed 50 cents/lb earlier in May, and have stayed above that level since May 14. Prompt-month PGP was at 51.50-52.00 cents/lb MtB pipe on Thursday.
The PGP contract price is generally 2-3 cents above the spot PGP price at the end of the prior month and the beginning of the new month. RGP pricing is also considered in the formula because it is a large source of PGP.
US propylene contract prices are settled on a monthly basis between major producers and buyers. The process includes price nominations by producers and subsequent negotiations with customers.
