Phillips 66 will reduce delivery of polypropylene grades because of issues with feedstock supply, further squeezing an already tight market, sources said Tuesday.
The company announced the measure late Monday in a letter to customers obtained by Platts.
"It's getting tough to find material," a source with a distributor said.
Phillips 66 sources a majority of its feedstock polymer-grade propylene from its Bayway refining and petrochemical complex in Linden, New Jersey. That complex is scheduled to undergo a 45-day turnaround beginning October 1.
The company had planned to build inventory for the turnaround using additional feedstock PGP from Williams Partners, but was left scrambling after Williams suffered an explosion and fire at its Geismar, Louisiana, olefins plant that resulted in two deaths and the disruption of production for an indefinite time frame.
"While we are currently producing at full rates with our integrated monomer, this disruption of feedstock supply has forced us to restrict present deliveries," Phillips 66 said in its letter to customers.
Phillips 66 said it was exploring other sources of feedstock, but that given the circumstances it was "compelled to reduce deliveries of product at this time and apportion the material we have available to our customers in a fair and reasonable manner so that we can build inventory to carry us through the turnaround."
Last week, Garyville, Louisiana-based Pinnacle Polymers issued a force majeure declaration on polypropylene, citing feedstock supply issues that market sources said also resulted from the Williams disruption.
The measure by Phillips 66 comes as at least three major producers have announced contract price increases for either July or August.
LyondellBasell will seek to raise prices by 2 cents/lb ($44/mt) in August, while Ineos is making a similar push for July. These increases would be in addition to any movement in the PGP monthly contract price.
Formosa Plastics last week announced it is seeking a standalone increase of 3 cents/lb ($66/mt) for July.
The nominations came as polypropylene contracts for June settled last week at a 3-cent/lb increase, following a similar hike on feedstock PGP.
The 4% increase pushed homopolymer injection grade polypropylene to 74-75 cents/lb ($1,631-$1,653/mt) on a delivered-railcar basis, as assessed by Platts.
