!"#$% '()*+ ,- ,.+ !

/-012+3+ 45/6+,
8y Mark Culner

volaLlllLy ln uS propylene prlces ls lnevlLably accompanled wlLh coded Lerms llke feedslaLes,
spllLLers, alky values and 8C spoL prlces. 1hls ls Lhe eLroChem Wlre's gulde Lo decodlng Lhe
propylene markeL.

!78!9:;<; !78=>"?@8< A784 %?;B4 "7B"C;7%
ropylene monomer (C) ls produced by Lwo meLhods ln Lhe uS. 1he flrsL ls as a byproducL of
eLhylene producLlon ln a sLeam cracker. SLeam crackers ofLen have Lhe ablllLy Lo swlLch
feedsLocks - eLhane, propane, buLane, llghL naphLha and gas oll - based on markeL condlLlons.
LLhane ls Lhe llghLesL feedsLock, and ylelds Lhe smallesL quanLlLy of propane, whlle llghL naphLha
and gas oll are Lhe heavlesL and yleld Lhe mosL propylene.

leed slaLes are deLermlned based on Lhe cosL of produclng one pound or Lonne of eLhylene
mlnus Lhe value of Lhe propylene and oLher co-producLs produced from Lhls sLream. 1he value
of Lhe co-producLs ln Lhls calculaLlon ls called a co-producL credlL. 8lslng propylene prlces creaLe
a larger co-producL credlL for heavler feeds versus llghL feeds slnce Lhls ylelds more propylene
per pound of eLhylene. 1hls essenLlally lowers Lhe cosL Lo produce a pound of eLhylene.

%!:@??;7%D 7;A@<;7@;% B<= 7'!
C ls also produced from reflnery grade propylene ln a planL called a spllLLer. 8C ls a crude
sLream LhaL conLalns propane and propylene LhaL comes from an oll reflnery's fluld caLalyLlc
cracklng unlL (lCCu) durlng gasollne producLlon. Chemlcal companles wlll buy Lhls 8C, run lL
Lhrough Lhelr spllLLer Lo separaLe Lhe propane from Lhe propylene and geL C.

Cll reflners are ln Lhe buslness of maklng gasollne, noL propylene or polypropylene. 1hey wlll
ofLen look aL Lwo componenLs Lo deLermlne where Lhey can feLch Lhe besL prlce for Lhelr 8C -
Lhe spoL 8C prlce and an alky value. An alky value ls an exLrapolaLed prlce LhaL Lells Lhe value of
Lhe 8C lnLo an alky unlL.

An alky unlL ls where alkylaLe ls made. AlkylaLe ls a blendsLock LhaL can be used Lo brlng gasollne
Lo proper speclflcaLlons. Many alky unlLs make alkylaLe from 8C. 8eflners are always looklng aL
Lhe prlce Lhey can sell 8C Lo spllLLer operaLors versus Lhe value Lhey geL from puLLlng Lhe 8C
lnLo Lhelr own alky unlL.

Lach reflnery ls dlfferenL and Lherefore has a dlfferenL alky value. Also, each reflner has dlfferenL
conLracLual obllgaLlons as lL relaLes Lo how much 8C Lhey sell Lo chemlcal companles versus
how much Lhey can puL lnLo Lhelr alky unlL. Powever, propylene markeL observers look aL a dally
alky value uslng a sLandard formula, whlch can be found ln Lhe eLroChem Wlre's 8C focus, Lo
spoL Lrends. lor example, lf alky values are slgnlflcanLly hlgher Lhan spoL 8C for an !"#$%&'"(
*+$" exLended perlod of Llme, Lhen Lhey may deduce LhaL when posslble reflners are dlverLlng
more 8C Lo Lhe alky unlL and selllng less Lo Lhe chemlcal markeL.




When a sLeam cracker favors llghL feeds, Lhen chemlcal companles wlll ofLen purchase more
8C Lo make up for losL propylene producLlon from sLeam crackers. Conversely, when heavy
feeds are favored, Lhen Lhere may be less demand for 8C because more propylene ls belng
produced durlng eLhylene producLlon.




!7@"@<' B<= :8'@%?@"%
ropylene monomer ls largely Lled up under long-Lerm supply conLracLs, and prlced uslng a
monLhly negoLlaLed conLracL markeL. SpoL Lrades are lnfrequenLly, and only lnvolved producers
and consumers. 1here ls currenLly no Lhlrd-parLy sLorage avallable for C, and Lherefore
Lraders are noL lnvolved ln Lhe domesLlc propylene markeL.
C ls mosLly LransporLed by plpellne, buL Lhere are also a few companles LhaL sell and purchase
C by rallcar. When spoL C deals happen Lhey Lyplcally are for dellvery by plpellne lC8 MonL
8elvleu, 1exas.

8eflnery grade propylene ls also largely Lled up under long-Lerm supply conLracLs, buL spoL
Lrades are more frequenL. As a resulL, Lhe lndusLry wlll ofLen look aL 8C spoL prlces as a prlce
dlscovery mechanlsm for C. lf 8C prlces move hlgher, Lhen a spllLLer operaLor may Lry Lo
lncrease C prlces because cosLs are golng up and Lhey wanL Lo malnLaln a margln over 8C.
Slnce a slgnlflcanL amounL of C ln Lhe uS ls produced from a spllLLer, Lhls economlc model has
wlde-ranglng lmpllcaLlons for Lhe enLlre uS propylene markeL.

8C spoL prlces are Lyplcally for plpellne dellvery lC8 MonL 8elvleu. Powever, a slgnlflcanL
quanLlLy of 8C ls LransporLed by rall and Lruck. SomeLlmes spoL deals are conflrmed lC8 MonL
8elvleu, 1exas for rall or Lruck, whlch can carry a dlscounL Lo Lhe plpellne markeL due Lo added
loglsLlcs expenses.


?;74% E
!'! F olymer grade propylene, propylene monomer
7'! F 8eflnery grade propylene
%02),,+/ - A unlL LhaL makes C from 8C
%,+5G H/5H6+/ - A unlL LhaL makes eLhylene from nCLs such as eLhane, propane, buLane and
llghL naphLha
"-I0/-*(H, - Chemlcals produced ln Lhe process of maklng eLhylene ln a sLeam cracker. Co-
producLs lnclude propylene, buLadlene and aromaLlcs.
Feedslate The cocktail mix of NGLs a steam cracker uses to produce ethylene. Light feeds
produce more ethylene and less propylene, while heavy feeds produce more propylene and less
ethylene. Feedslates change based on the price of NGLs and the value of the ethylene and the co-
products.