The propylene chart below shows a significant disconnect between spot and contract prices – more than at any point in recent history, and if the US contract price does not fall it will likely be an indicator that either discounts have increased or that more volume is moving against a spot price marker. The pressure is also on to lower ethylene contract prices, but the propylene spread is far more extreme.
Source: Bloomberg, C-MACC Analysis, October 2021
Source: Bloomberg, C-MACC Analysis, October 2021
We note more European chemical producers pushing through price adjustments to reflect the higher cost of energy in Europe and we would expect to see more of these announcements as we head into earnings season so that companies can talk about the measures they are taking to counter energy inflation. Even though US ethylene and propylene prices have weakened, as we showed in yesterday’s Weekly Catalyst report and our Sunday Thematic, US costs are increasing and while margins in the US for olefins and polyolefins are generally robust, they are falling quickly from 3Q highs.