Over the period of March to December 2022, prices for Polymer-Grade Propylene (PGP) fell by more than 60% due to high inflation and rising interest rates that reduced demand for downstream Polypropylene (PP). Since there was no demand for durable goods during that time period and Asian-origin resin was more reasonably priced than US Gulf Coast exports, PP prices plummeted by 56%.

Upstream Propylene prices will likely improve during the first quarter of 2023 as demand rises, but the rising price trend is doubtful due to obvious fresh supplies caused by new production units in the US region. The launch of ExxonMobil's brand-new 450,000 MT/year PP unit in December at its Baton Rouge, Louisiana, complex may increase Propylene demand. Starting in Q2 2023, the new 750,000 MT/year Propane Dehydrogenation (PDH) facility being built in Texas by Enterprise Products Partners will raise the US PDH capacity to 3 million MT/year. The first significant capacity addition in North America is not anticipated until Formosa Plastics completes a new 250,000 MT/year unit in Point Comfort, Texas, in 2024. In Calgary, Alberta, Inter Pipeline began up a 525,000 MT/year PP unit in July, in addition to the increased ExxonMobil capacity. The Braskem unit in Texas, which was halted in December 2022, is expected to resume production in Q1 2023, adding to the rising production rates in the US market in 2023

Our sources stated, "There are way too many plants just starting up to take any bullish demand scenario you can come up with." The demand for polymers will not be able to surpass the growing PP capacities, even if outputs are interrupted by hurricanes and other severe weather conditions.

According to ChemAnalyst, PP prices will not necessarily follow the price trend of upstream Propylene in the US market. A recent increase in production rates across the Gulf coast will largely continue to maintain the oversupply situation of PP in the US market, keeping the cost of the commodity in check.