US propylene prices may continue to trend downward into 2022 barring unplanned outages or feed spikes.
US polymer graded propylene (PGP) prices reached above the $1/lb mark on two different occasions during a year plagued by production-related outages. Propylene inventory levels entered 2021 at their lowest level in 17 years, according to data from the American Fuel and Petrochemical Manufacturers (AFPM), while demand for propylene derivatives rose.
The February 2021 freeze, which saw much of the state of Texas lose power amid subzero temperatures, would then knock off line much of the country's PGP and refinery grade propylene (RGP) capacity. All three Gulf coast propane dehydrogenation (PDH) units, the majority of Gulf coast ethylene crackers, and most Gulf Coast refineries were forced out of service. Prompt month PGP prices reached an all time high of $1.25/lb while prompt month RGP reached 39.875¢/lb.
Prices fell as the units returned from the storm-related outages but reached $1/lb again when Enterprise Products' 750,000 metric tonne (t)/yr PDH unit went off line for 34 days in late July. Since then, prompt month PGP has fallen by over 50pc and the supply demand imbalance for propylene has been rectified by dampend demand and little to no unplanned outages.
Propylene inventories are expected to continue to build going into the new year and pull down prices as a result. Imports of polypropylene during the third quarter have many derivative producers on inventory control plans and not looking to purchase propylene, which dampens demand for PGP. There are also no scheduled turnarounds for the earlier part of 2022 for any of the three gulf coast PDH units.
Refineries are expected to continue to run close to full capacity and produce RGP from fluid catalytic cracking units. Producers with propane splitting capacity have continued to optimize them and take advantage of the PGP-RGP spread.
The only potential hiccups to building propylene supplies unseen for much of 2021 would be unplanned outages to PDH units or increasing feedstock costs. Propane prices reached multi-year highs in the fourth quarter and have only recently waned. Increases in feed costs have not influenced PGP prices for much of 2021 as derivative demand usually outweighed supply cost, but as supply builds feed costs could drive propylene prices higher.
Potential price increases in heavier feeds would also mean more ethane used in ethylene crackers and less byproduct propylene as a result. Higher oil and gasoline prices could also incentivize refiners to focus more on octane blenders as opposed to RGP.
