Brainfood for the Plastics Industry, January 2025

Market Update

Plastics Feedstocks (Oil, Naphtha, Propane)

All upstream energy prices are significantly higher compared to early December.
WTI crude oil prices are up 15% the past month to a spot price of approx. $78/barrel. Oil prices are the highest they have been in 4 months. Part of this price rally is a result of the exiting Biden administration placing even stricter sanctions on Russian oil last Friday.
Propane prices in Mont Belvieu, TX are also up 15% to almost 91 cents per gallon (cpg). Propane prices have rallied because of the artic cold temperatures covering much of the Midwest and East Coast the past 7-10 days. Propane prices are the highest they have been since Feb 2024.
Over the past month naphtha prices (CIF Japan) are 8% to $676/mt.

Propylene/Polypropylene

Physical PGP prices have followed suit in terms of jumping up in price from December. Physical PGP in Mont Belvieu, TX is currently at 40.25cpp, which is up 15% from the December low price of 35cpp.
December contract PGP settled at 39cpp which was 1cpp lower than our estimate of 40cpp for December. The December monthly average physical PGP price was 36.7cpp.
We wrote in our last report that PGP prices would limp to the finish line of 2024 between 35 and 38cpp and then start out the 2025 year with higher pricing pressure. This is what happened. On Dec 31, 2024 physical PGP traded 36cpp. The lowest physical PGP price in January this year was 37.5cpp and is now up to 40.25cpp.
BlueClover holds a bullish view for 1st quarter PGP pricing. For contract PGP prices, BlueClover is forecasting 44cpp for January, 54cpp for February, and 62cpp for March. This is a 1st quarter average of 53cpp. It’s a bold bet to assume this much volatility. In our opinion if you polled pricing analysts in the PGP space I believe the average consensus would be for PGP pricing to go up in the 1st quarter but maybe only 4-8cpp up from the December price of 39cpp. BlueClover’s estimate is for a 14cpp increase in 1st quarter from the December contract PGP price point. Our reasons are as follows…
Here at BlueClover we would break down our PGP bullish view as follows: 60% higher upstream costs and supply side tightness, 20% market psychology and 20% slightly better than expected demand.

Starting with the upstream costs and supply side tightness.

Upstream Costs: As of right now with propane prices at 90cents per gallon the PDH gross margin between Mont Belvieu propane and physical PGP is about 15cpp. The average gross margin for this spread in years 2023-24 was about 23cpp. (See Trader Toolbox on page 5) Also rising crude oil prices will give producers an outlet for PP exports which will help with the oversupply of PP and allow PP reactors to call for more PGP if they can run at decent operating rates.
Potential Supply Tightness: PGP is a byproduct of ethylene production. There are 9 ethylene crackers going down for turnaround between late December and April as reported by ICIS. Also, PDH units along with ethylene crackers can get disrupted by extreme cold temperatures in the Texas area. With a lot of winter left this is still a possibility.

Market Psychology

Group think does not stop at Bitcoin or Nvidia stock. If you haven’t looked at Nvidia stock, please go check that out. Group think also finds its way into commodity markets and much of the PGP and PP industry are expecting prices to rally in the 1st quarter. If prices start to rally, which they have slightly already, it becomes a train leaving the station and folks want to buy before it gets too expensive, leading to more buying and supporting the price.

Better than Expected Demand

Anecdotally we are seeing PP customers start off the year purchasing materials. Perhaps it’s a result of stockpiling ahead of anticipated price increases. But maybe it’s the manufacturing sector experiencing a bounce up in activity. In December the ISM Purchasing Managers Index (PMI) which is a measure of USA manufacturing registered a 49.3 mark, the highest its been in nine months and a jump up from 48.4 in November. While numbers below 50 represents contraction in manufacturing the trend over the past two months has been upwards, signaling a bounce off the bottom.