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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 12/06/2017 (18:12)
PE Drivers

Resin markets fell silent without the potential for any increases in the near future and resin supplies are reported as very healthy.

Market Overview

Next week’s inventory report will be very telling of the ensuing months.

North America processors report good supply.

The secondary market offers continue to move lower.

Suppliers are reportedly asking for railcar returns as inventories grow.

Early indicators are showing export activity to be stronger in June than May.

Feedstocks

Ethylene: The spot market fell almost 10% from last week’s high, finishing the week in the mid $0.20’s.

Naphtha: Prices declined this week by another $20/ton to $440/ton, in sync with lower oil prices. Global ethylene prices also decreased this week.

PE Outlook and Suggested Action Strategies

30 Days: Same actions as last week. Higher inventories and good production will apply downward price pressure this summer. Buy as needed and aggressively in the secondary markets. When possible, delay purchases into the next month. 60/90 Days: It is reasonable to expect $0.03-0.05/lb price erosion in the next 60-90 days if oil remains below $50/bbl. There is nothing present that could drive an increase outside a major disruption.

PP Drivers

May PP demand rebounds 10.8% from April.

Market Overview

Spot PGP stays steady this past week with current values at $0.37/lb. If spot PGP prices stay here, it is possible sellers will ask for a penny increase to contract pricing. Implied contract price is $0.395/lb.

FHR’s PDH unit is not yet running. It remains in start-up and is expected soon.
Propane and butane prices are down with oil prices. Butane is advantaged over ethane and propane is at parity.

Polypropylene contract prices will move with PGP for June.

May PP demand was the strongest of the year following a very soft April. Producers are reporting solid sales for June.

May PP production was also up, running at a 91.2% operating rate.

PP inventories were down 40 million/lb heading into June with Days of Supply moving down to 32.6 days.

PP producers are likely to be feeling bullish after this recent ACC report.

Propylene

Spot PGP has traded several times at $0.37/lb and most recently at $0.3725/lb.
Spot RGP is valued at $0.235/lb.

EIA inventories were down with levels dropping from 3.03 million/bbl to 2.79 million/bbl; the third week of draws.

PP Outlook and Suggested Action Strategies

30 Days: June prices are expected to be flat to slightly higher based on the coming PGP settlement. 60/90 Days: There remains potential for some additional downward movement in both PGP and PP prices, but the market is feeling close to the bottom.

PS Drivers

PS producers are insistent about flat prices in June amidst falling feedstock prices.

Market Overview

Several producers have already informed their customers that their June PS prices will be a rollover. The rollover is an attempt to stop the price erosion from the past two months.

Formula-based buyers may also see flat prices, depending upon the structure of their contract.

Technically, the PS market should be in the midst of a busy season, but demand remains lackluster as buyers continue to buy JIT.

There are reports that PS is being imported into NA at price levels lower than domestic prices. These low-priced imports will provide leverage to NA buyers seeking additional price concessions in June.

Feedstocks

Benzene (BZ): BZ spot prices and the forward bids/offers continue to hover in the range of $2.50/gal-2.62/gal. The market sentiment is bearish; however, this could change because of issues with supply deliveries due to flooding of the Mississippi River.

Styrene Monomer (SM): The May CP settled down $0.015/lb ($0.63/lb-0.8375/lb). Spot prices showed a week on week decline of ~$0.02/lb, but have since stabilized.

Butadiene (BD): Ample inventory and record level price drops in Asia pulled weekly spot values down 10%. Invista is restarting, which will add to the supply position. Market buying interest is dull, prompting expectations of additional price erosion.

PS Outlook and Suggested Action Strategies

30 Days: June prices will post flat. However, if feedstock prices continue to come off, there could be further opportunities for lower priced one-off negotiations. 60/90 Days: Buy moderately. The busy season will be coming to an end, possibly putting more downward pressure on the producers. Buy cautiously during August/September, when NA PS producers like to push prices higher, so you will want your inventory positioned to be able to respond accordingly.

PVC Drivers

Spot ethylene pricing is averaging down $0.03/lb in June, driving expectations for a lower June contract settlement and reversing the $0.0125/lb increase in May.

Market Overview

RMC for PVC is expected up $0.005/lb in June versus April as ethylene will return to April levels but chlorine will be higher after outages in the 2nd half of Q2 and strong demand elevated the market.

Global PVC pricing appears more stable as lower oil and ethylene costs reduce production costs.

Domestic PVC prices are expected flat in June as the supply/demand balance remains on the tighter side but are expected to improve gradually as operating rates increase to supply healthy construction demand.

Supply & Demand

Supply: Operating rates are expected to improve in June/July as upstream outages are concluded.

Demand: Export demand strength will likely see moderate improvement in Q3, as domestic demand is expected to pick up for a healthy construction season.

Feedstocks

Chlorine: Bullish fundamentals were somewhat mitigated by weak trading activity, keeping spot prices flat on the week.

Ethylene: The spot market fell almost 10% from last week’s high, finishing the week in the mid $0.20’s.

PVC Outlook and Suggested Action Strategies

30 Days: Continue to buy as needed while prices continue flat and RMC returns to near April levels. Improved operations and lower ethylene costs will eventually pull prices lower, but more gradually. 60/90 Days: Supplies will improve in Q3 with additional ethylene capacity keeping a lid on RMC and stronger PVC operating rates improving the supply/demand balance. Buy as needed.

PET Drivers

Lower crude oil prices create potential decreases for June.

Market Overview

The summer bottling demand season has been somewhat mitigated by decent supply availability, creating balanced market fundamentals and allowing upstream costs to be the primary price driver at this time.

Spot PET prices continue to be flat since early May. June contracts still have a few $0.03/lb increase nominations (due to higher comonomer costs), despite raw material costs projected to be $0.01/lb lower.

WTI crude oil prices started the week near $48/bbl, but have since dropped to just above the $45/bbl mark. Refinery rates are still reportedly in the mid 90%’s.

Feedstocks

Paraxylene (PX): Crude oil prices staying below the $50/bbl mark has pulled prices down the supply stream, from gasoline, to mixed xylenes, and to PX. The summer driving season is still expected to raise gasoline prices in the near future.

PTA: Spot prices in US and Asia are flat to slightly lower. Upstream declines continue to pull down on PTA pricing, but current outlooks are for steady increases for the next few months.

MEG: A number of MEG producers in NA have nominated June MEG contracts at a rollover from May, mainly as a result of mixed pricing in Asia coupled with tighter domestic supplies. Lower crude oil prices should continue to support lower MEG from the cost perspective.

PET Outlook and Suggested Action Strategies

30 Days: The $0.03/lb increase nominations may have some difficulty due to cost estimates falling another ~$0.01/lb for June. But it will become clearer when we get feedstock contract settlements. More competitive situations are expected to open with the widened range of price change potentials. 60/90 Days: Even if crude oil prices remain under $50/bbl, there are still enough drivers on the horizon to warrant price increase expectations in the next few months. Current PET prices are relatively quite low, so it would be reasonable to buy more at May/June price levels to prepare for the potential increases in July/August.
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