The chart below and the others in our daily report linked add more weight to our argument that polymer grade propylene prices in the US have some downside and that it could happen relatively quickly, especially if ethylene producers play the current propane feedstock arbitrage to their full extent. Given weaker propylene derivative markets outside the US, propylene derivative pricing would likely come under some negative pressure if propylene prices fell.
Source: Bloomberg, C-MACC Analysis, May 2021
At the moment, we think we are at that phase in several markets where sellers are holding on for as much as they can get before an inevitable correction. We have discussed polyethylene in recent work and we see methanol producers pushing to hold US contract prices despite a weaker spot market. Methanol costs are up because of the higher natural gas prices, but margins are very positive in the US and the weaker spot market may be the dominant determinant in the next move for contract methanol.
But we feel that we now always need to add the following disclaimer: we cannot predict the weather effect on US chemical production as we enter hurricane season and it has been impactful several times over the last few years.
