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Force Majeure Events and Hurricane Impacts US Propylene Prices Skyward in July 2024
Force Majeure Events and Hurricane Impacts US Propylene Prices Skyward in July 2024

Force Majeure Events and Hurricane Impacts US Propylene Prices Skyward in July 2024

  • 05-Aug-2024 2:32 PM
  • Journalist: Rene Swann

The Propylene market in the United States experienced a significant hike in July 2024, characterized by a sharp escalation in prices. This upward trajectory was primarily driven by a supply-side disruption, coupled with the high production costs during this timeframe. Despite the demand for Propylene from downstream sectors including Polypropylene being not robust, the prices remained at a higher end amidst logistical issues due to hurricane season.

A series of unforeseen events combined to create a significant shortfall in Propylene supply. Several key production facilities underwent unplanned shutdowns due to a combination of factors, including equipment failures, maintenance issues, and the impact of severe weather conditions. Notably, Shell Chemical's cracker in Deer Park, Texas, with a Propylene capacity of 190,000 metric tons per year, was idled due to a feedstock error. Similarly, INEOS Olefins and Polymers' cracker in Alvin, Texas, boasting a capacity of 180,000 metric tons per year, was temporarily shut down as a precautionary measure against Hurricane Beryl. These underlined events led to supply constraints and tightened the market to settle the offered quotations at USD 1108/MT Propylene Polymer Grade DEL US Gulf in July 2024. Beyond these high-profile incidents, a multitude of other units across the country encountered operational challenges, including force majeure declarations stemming from lightning strikes, process upsets, and hurricanes. These widespread disruptions collectively exacerbated the supply shortage, propelling prices to unprecedented levels.

The hurricane season further compounded the supply tightness. Severe weather systems not only caused direct damage to infrastructure but also disrupted logistics and transportation networks, hindering the movement of the product both domestically and internationally. The inability to export Propylene due to these challenges contributed to the expanded domestic inventories and intensified upward pressure on prices. Additionally, the escalating costs of crude oil, the primary feedstock for Propylene production, also played a pivotal role in the price surge. As crude oil prices climbed, so too did the production costs of Propylene, which manufacturers certainly passed on to consumers and led to price hikes. Meanwhile, demand for Propylene remained persistent from the Polypropylene sector, which caters to the plastics and textile industries. However, the logistical hurdles and elevated Propylene prices squeezed profit margins for downstream manufacturers, forcing them to adapt their purchasing strategies and potentially curtailing production activities.

As per ChemAnalyst, the Propylene market in the USA is expected to remain elevated as the suppliers are likely to keep the market situation strong. While some production facilities may gradually resume operations, restoring normalcy to the market will likely take time.

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