US PP Market Balances Out in Late August 2024: Expected Price Increments

The US Polypropylene (PP) market admitted to a period of stability during the 2nd half of August 2024. While prices of feedstock Propylene (Polymer Grade) continued to climb due to various production issues, moderate trading activities and competitive imports from Mainland China continued to weigh on the domestic US PP market. This was despite the improvement in demand conditions for PP due to improvement in the automotive industry.  Prices of PP were recorded to have witnessed a depreciation of approximately 6% since the onset of August 2024 as suppliers were mostly compelled to reduce prices of the commodity due to competitively priced imports from Asia and Middle East. Export conditions for the US PP market also remained unfavourable as aside from Mexico, buyers generated little interest.

Production conditions across the US PP market remained challenging as prices of feedstock Propylene (Polymer Grade) witnessed a rise of approximately 8% which continued to influence the prices of PP across the US market. Aside from the feedstock Propylene market undergoing challenging conditions in production, the US PP market also witnessed several challenging conditions in the supplies. INEOS remained on its Force Majeure for Copolymer, though production has recently restarted. INVISTA is still experiencing downtime on some of its production lines, but these are anticipated to be back in operation soon. Meanwhile, Formosa is projected to introduce new production capacity before the end of the year. In the interim, supplies of Polypropylene (PP) Copolymer, particularly those with high flow properties, have remained tight across the supply chain. Conversely, availability of PP Homopolymer has been relatively abundant.

However, demand conditions for PP remain moderate as trading activities were reported to have been lacklustre which resulted in the US PP market balancing out in the middle of August 2024. US Suppliers reported building inventories over months of May and June which resulted in ample availability of PP in the US spot market. Completed PP business across the US marketplace was limited as processors worked off their healthy on-hand resin stocks, which they replenished over the past 4 months. According to market insights, domestic sales over the past four months have averaged over 100 million pounds more per month compared to the previous four-month period. August Polypropylene contracts are poised to take a cost-push increase for the third straight month as some feedstock Propylene (Polymer Grade) units continued to remain under maintenance turnarounds. However as of now US PP been lightening their positions as the influence of high production cost for PP are expected to surface though remain overweight as the hurricane season could still potentially intensify, creating further uncertainties in the US PP market. The feedstock Propylene trading was very active as additional PGP production issues drove buyers to the spot market sending prices higher, which further influenced production costs of PP. Dow experienced an outage at their Propane Dehydrogenation (PDH) unit, while Enterprise’s No. 2 PDH unit in Mont Belvieu, TX, was restarted on Wednesday after undergoing maintenance. However, it soon encountered further issues and failed again. This disruption forced buyers to turn to the spot market to secure their supplies.

As per expectations, prices of PP across the US market are expected to stay elevated during September 2024 as restart of units of Dow and Enterprise plants remain unclear. Demand conditions are also expected to improve as trading activity is anticipated to improve during as the festive quarter nears, including the depletion of inventories as US suppliers continued to work through existing inventories.