The prime element that bolstered the US propylene prices to reach record high levels during Q1 2012 was not the conventional factors such as the feedstock dynamics, cracker turnarounds or downstream demand but was the phenomenon of increased alkylation value in the US.

Alkylationis the process of producing alkylates from refinery grade propylene and is highly dependent on gasoline premium price as higher gasoline prices will incentivize the refiners to push propylene for alkylation during high alky netbackperiod. Higher the alky value, higher is the probability of the refinery gradepropylene getting diverted for alkylation rather than polymer grade propylene production. This in turn will lead to a supply constraint in the polymer gradepropylene in the US and will eventually lead to a price increase in the region.

Alkylationis a major alternative use for refinery grade propylene and is the process of producing alkylates from refinery grade propylene to help gasoline become clean burning fuel.

Alkyvalues are poised to make further gains during Q3 2012 following expected gains in US gasoline prices. This may exert a pressure on the US propylene prices during Q3 2012.

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About the Author:

Silpa Naiju is a Research Analyst (Petrochemicals & Fibers) at the Bereo Inc.