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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 01/06/2015 (21:36)
According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, in the PE market, May polyethylene prices increased $0.05/lb in May supported by strong exports and good demand in North America. No additional price increases are pending.

Flooding in Houston could add to the congested rail structure. Delays have not been notable; however attention to deliveries should be a priority.

Exports continued a healthy pace through May. The April export volume exceeded the three year average. As global prices peak, exports should return to normal levels of 20% of production.

Secondary markets this week began to show some signs of tightness for good off grade resins. Generic prime pre-buys on the distributor and processor level have covered short term inventory needs.

Ethylene markets have remained a steady $0.36/lb despite another Williams outage this week. Spot ethylene prices are only supported by strong PE demand, including exports. Williams has not announced a restart date.

As stated, international prices have peeked near $0.62lb. Some regions are offered lower pricing for June. Naphtha prices softened this week to below $570/mt from $580/mt, supporting a selling floor near $0.54/lbs for commodity PE grades.

Ethane: Since the December 2014 drop in prices, spot ethane has stayed steady within the range of $0.17/gal to $0.19/gal on a month to month basis. Ethane remains quite flat, currently sitting at $0.1825/gal, a $0.005/gal increase since the end of April.

Ethylene: Prices have been very stable all month with minimal fluctuations. The monthly average for spot prices is $0.36/lb, only $0.01/lb above April prices. Williams Geismar is down, no restart dates. They have put ethylene on allocation which may cause a short term spike in the spot prices. The cash cost to produce ethylene is holding steady under $0.08/lb.

RTi Polyethylene Outlook and Suggested Action Strategies

30/60 Days: Manage inventories and buy to meet demand. Global resin prices have peaked, the likely success of an additional, beyond the May $0.05/lb price increase in NA will be difficult to sustain. As global outages are reduced, oil and naphtha prices will be the leading indicator for resin prices. 90 Days: Expect price increase announcement for August or September do to three contributing factors; good packaging demand in the fall, the hurricane season, and the suppliers will have not announced an increase for several months by this time.

In the PP market, May PGP contract prices settled down $0.01/lb to $0.42/lb just over a week ago, and now June talks should begin heating up over the next week. So far, we have heard of a June nomination calling for a rollover, but we have not been able to confirm this at the time of this writing. Spot PGP traded at $0.395/lb earlier this week, which was up from late last week. Later this week, PGP traded down to $0.3875/lb followed by bids at $0.38/lb. Current indicators suggest a June settlement of down $0.01/lb but further spot market weakness could lead to a larger decrease with time.

Spot RGP is being valued at $0.28/lb, but we have heard of railcar deals getting done at $0.31/lb and slightly higher. Cumene buyers appear to be behind these deals with idea of blending Cumene into the gasoline pool. This could create some support for RGP. Otherwise, supply of propylene remains strong.

Refinery rates inched higher to 93.6% (US) and 95.0% (PADD3). Propane and butane prices have both dropped close to $0.10/gal over the past week maintaining their firm hold into the cracker feedslate.

They appear to be vying for a larger piece of the feedslate. Of course, as propane prices decrease, PDH margins maintain or grow depending on the price movement of propylene. PDH margins are currently healthy and production is incentivized to run.

Propylene prices in Europe carry a heavy premium to the rest of the world due to outages. The tightness in Europe is expected to last through June with relief coming shortly after. Propylene in Asia has begun to weaken with improvements in supply. Europe is currently importing propylene from the US and imports from Asia were being looked this past week.

In polypropylene, most major PP producers have price increase nominations for June calling for price increases of $0.03/lb above and beyond the movement in PGP. One producer is calling for $0.04/lb for a mid-June implementation. Braskem announced their intention this week, increasing prices by $0.04/lb on July 1st. With PP demand growing at a 4.5% rate compared to 2014 averages and operating rates averaging 91.1%, producers carry pricing power and momentum heading into June. We think they will have at least some success with their margin expansion efforts.

The industry as a whole is trying build margins to levels that will attract investment dollars. So far, only rumors of new PP capacity have been heard, nothing official. We expect that before 2015 is over, there will be announcements new PP capacity.

Pinnacle Polymers has not lifted their Force Majeure that was announced on May 11th, but their main feedstock source, Marathon, is heard to be delaying their maintenance shutdown, allowing Pinnacle to keep running. Most all Pinnacle customers have been informed that their initial orders for June are expected to be filled.

RTi Polypropylene Outlook and Suggested Action Strategies

30 Days: PP prices for June are expected to stay relatively flat. Much depends on how much PGP
ultimately settles down and how much of that the producers keep in the form of margin expansion.
60/90 Days: We see the potential for further declines in PGP prices with strong supply dynamics, but
not all of those declines, should they happen, will be transferred downstream into the PP price.


In the PVC market, nominated increases were undercut as demand has disappointed on both the domestic and export front. May is trending flat to down as export pricing moves lower, and domestic & exports sales fell in April.

Feedstock cost for PVC is expected up $0.01 to $0.02/lb in June, as compared to April from a 2 month settlement in ethylene. Higher spot chlorine is expected to pressure contract up in June.

PVC output in April was reduced by 8% to operating rates below 80% as producers attempted to offset perceived weakness in demand. Supplies are good, as operating rates in May are expected to increase.

The chlorine increase has been blamed on strong seasonal demand for both PVC and bleach products.

Domestic PVC demand fell by 4% and exports by 3% in April.

Higher ethylene prices overseas due to Q2 outages did not help PVC exports as much as expected.

Export prices have continued to decline for 2 months, adding a downward pull on domestic pricing.

Domestic demand suffered from a lack of GDP growth in Q1 (now adjusted down from +0.2% to -0.7%) that continues to drag on anticipated growth in Q2. We are still expecting an improved construction market from last year, but nothing the PVC suppliers can’t easily handle.

April housing starts now reflecting a stronger construction market by increasing some 20% above March and a year ago April. Building permits are also up 10% over March, and 6% over a year ago.

Shintech has announced the construction of 1 billion pound ethylene cracker in Louisiana to open in 2018. VCM and PVC expansions will open by early 2016, somewhat delayed from original expectations.

Spot export trades continue to decrease fractionally week over week, now below $0.36/lb as US exporters are competing with Asian resin in export regions.

Operating rates fell to 77% in April falling below demand levels for an inventory draw.

PVC raw material costs are expected flat to down fractionally for the remainder of the quarter at levels 15-20% below Q4 2014.

Ethylene: Prices have been very stable all month with minimal fluctuations. The monthly average for spot prices is $0.36/lb, only $0.01/lb above April prices. Williams Geismar is down, no restart dates. They have put ethylene on allocation which may cause a short term spike in the spot prices. The cash cost to produce ethylene is holding steady under $0.08/lb.

Ethylene: Prices have been very stable all month with minimal fluctuations. The monthly average for spot prices is $0.36/lb, only $0.01/lb above April prices. Williams Geismar is down, no restart dates. They have put ethylene on allocation which may cause a short term spike in the spot prices. The cash cost to produce ethylene is holding steady under $0.08/lb.

Chlorine: Seasonal price increases are in effect for chlorine (currently at $225/st), as summer months tend to have higher demand for chlorine. Chlorine shot up $30/st this week, coming to a total increase of $65/st in May.

RTi PVC Outlook and Suggested Action Strategies

30 Days: Leverage low average raw material cost vs last year and increasing domestic product availability for lower pricing, along with weakened demand both domestically and for export. 60/90 Days: As ethylene and PVC supplies strengthen into Q3, pursue opportunities to roll back earlier increases as export markets will continue to demand lower pricing as outages overseas are concluded.

In the PET market, after moving up as much as $0.04/lb in April, PET contracts are expected to increase again based on higher costs and continued strong demand. Several producers have nominated an additional $0.04/lb for May.

Raw material costs for May moved up just shy of $0.03/lb. Producers are likely to get anywhere from $0.02/lb to $0.04/lb, depending on how much of the increase was taken in April.

PTA contracts settled at $0.4755/lb, an increase of $0.0235/lb from April. This represents the bulk of the cost moves, with the rest coming from ethylene glycol.

PET production costs are likely to peak during the next 30-60 days. Seasonal demand will also be starting to fade, particularly in Asia. In addition, oil prices do not appear to be showing signs of sustainable strength.

The PET market in Asia has seen higher prices and strong demand during the past couple of months.

This has led to higher import pricing into the US as well. However, this week, prices have started to ease as upstream costs moved lower.

European resin buyers also saw considerable increases in April. While feedstock costs have continued higher this month, with PX settling up €80/mt, buyers are beginning to lose interest as inventories have been replenished. This is starting to become evident, as spot prices are down this week.

The USITC unanimously agreed to move forward with the anti-dumping case against Canada, China, India, and Oman. Preliminary countervailing duty determinations are expected around June 3, and preliminary anti-dumping duty determinations are expected around August 17.

M&G’s plant in Corpus Christi, TX is still on track to begin production in 2016. When it reaches full capacity, it will increase US PET capacity by 30% and PTA by 40%.

PX: Contract prices for PX settled this month at approximately $0.49/lb in the US, an increase of $0.035/lb since last month. Prices shouldn’t increase much more after this. Spot pricing in both the US and Asia have been stabilizing the past few weeks.

PTA: Contracts settled at $0.4755/lb this month. Spot PTA in Asia, on the other hand, has risen to about $730/mt ($0.33/lb) since April, but we could see prices ease after the Dragon Aromatics Plant restarts in June.

PX: Contract prices for PX settled this month at approximately $0.49/lb in the US, an increase of $0.035/lb since last month. Prices shouldn’t increase much more after this. Spot pricing in both the US and Asia have been stabilizing the past few weeks.

EG: Spot and contract prices in Asia have been trending upward since January 2015. Asian contract prices did settle at $0.454/lb this month, reaching the same price as it was back in December of last year

RTi PET Outlook and Suggested Action Strategies

30 Days: May PET prices are moving higher after the contract feedstock settlements. Increases should
be no more than $0.03/lb based on the final raw material cost movements. Aim for pricing closer to
$0.02/lb based on availability of imports from Asia. 60/90 Days: The market is likely to peak in this timeframe. Costs are expected to move down, and seasonal demand is going to ease. Price reductions could start in July.


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