Sharp Propylene Rebound for the United States — Why? Mintec - October 13, 2016 6:00 AM | Categories: Commodities, Guest Post | Tags: General News, Mintec Spend Matters welcomes this guest post from Verity Michie, data analyst at Mintec. Propylene is one of the most important petrochemicals in the world. Two-thirds of the global propylene demand is for producing polypropylene (PP). Propylene is used as a starter material for production of acrylonitrile, propylene oxide — which is used to produce propylene glycol and acrylic acid, among many other things. In the first half of the year, we wrote about how propylene prices were rebounding after dropping by 80% between Q4 2014 and Q1 2016. Prices softly increased over the first half of 2016, rising 33% between the end of February and the beginning of August. Propylene prices have historically followed their feedstock, crude oil costs, closely. However, recently propylene prices have surged 44% month-on-month in mid-September, reaching a 13-month high, despite a downward month-on-month feedstock movement. So, why have prices jumped all of a sudden? Well, this has been a result of low supply, caused by various production outages in the U.S. In mid-August there was a fire at Motiva’s 235,000 barrel per day refinery in Louisiana, where repairs are expected to take up to four months. Furthermore, in mid-May, Dow Chemical experienced an unplanned outage of its 750,000 metric ton/year propylene dehydrogenation (PDH) plant. Dow Chemical then shut the facility for planned maintenance two months later. Following that, Flint Hills Resources temporarily shut its 545,000 mt/year PDH plant. Although this was planned, outages have also occurred in both Valero’s refinery and LyondellBassell’s plant in Texas. A further gasoline spill at Colonial Pipelines’ Alabama plant caused the main gasoline pipeline delivering fuel along the Gulf Coast to close, causing refineries in Louisiana along the same pipeline to cut production by up to 20%. As a result of these outages, inventories of propylene intended for non-fuel use were at the lowest levels in 22 months, at 2,197,000 barrels in August, but have since climbed to 2,372,000 barrels at the beginning of September. Prices should ease when production units come back online after the peak autumn maintenance season. As supply increases and the market balances itself, U.S. propylene prices should continue to follow feedstock crude oil cost. Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of follow-up comments by email. Notify me of new posts by email.