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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 14/09/2015 (18:12)
According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, September prime prices are down $0.04/lb for all PE resins from all the PE suppliers.

Preliminary ACC data for PE is out, showing a total build of 55 million pounds from July to August (HDPE +74MM/lb; LDPE +8MM/lb; LLDPE -27MM/lb). More information available in our upcoming PE Inventory Update scheduled for Monday.

Off grade prices have decreased from the August prices. Most PE resins are selling below $0.55/lb and the low end PE resins selling below $0.50/lb.

Dow and Westlake have announced an October price increase of $0.07/lb and $0.05/lb, respectively. This message to the market intends to stop the decreases and potentially improve perception of the PE industry to the investment market.

Traders are buying PE for export from $0.47/lb to $0.49/lb for Latin America and South East Asia.

Globally prices have settled. Buyers in the other regions have accepted prices as oil rebounded and have steadied.

Latin America prices are offered prices $0.50/BRC from North America and $0.48/BRC equivalent from the Middle East for LLDPE.

Houston packaging facilities are backed up again due to high export levels. Lead times are exceeding three weeks, usually ten days lead time.

Ethylene and Ethane prices remain stable. Both ethane and ethylene production are near all-time highs.

RTi Polyethylene Outlook and Suggested Action Strategies

30 Days: September prices will settle down $0.04. This price may be the new benchmark as prices globally have steadied. Prime buyers should buy to meet demand. Off grade buyers should consider earlier buys as market buying activity could improve. 60/90 Days: As global prices and North American prices firm, oil will be the driver for any price movement. Expect prices to remain at the September levels and changes will be led by the movement of the oil prices. Increases will be difficult to achieve until oil exceeds $60 per barrel.

In the PP market, the propylene market awaits the September PGP contract settlement. Spot markets for propylene have been quiet until late this week. Spot PGP was transacted at $0.2625/lb, with spot RGP transacting at $0.1625/lb and $0.165/lb.

Crude Oil is up from recent lows with WTI valued at $45.73 per barrel.

Refinery operating rates saw a big drop this past week with rates dropping to 90.9% (US) and plunging to 87.6% in the propylene rich PADD3 region. Propylene inventories also saw a decline, falling to 4.35 million barrels. Despite the recent downtrend, overall inventory levels remain relatively high and are still above the yearly high from 2014.

Propylene prices assessed on a FOB Korea basis are valued at $0.294/lb. Prices in the Far East are down roughly $0.09/lb over the past two months and have quickly caught up to US prices. PGP prices in Europe also continue to close the gap to US prices. September contract prices for EU PGP were settled at €820/mt ($0.416/lb), but spot prices are getting crushed. Spot prices in Europe have been seen at a USD value of $0.25/lb. We have even heard of an export cargoes from Europe to SE Asia. Bottom line is that propylene is long globally.

On the polypropylene front, supply and demand remain tightly balanced. It does appear that the buy side is a little more comfortable than earlier in the year. We are not seeing many instances where buyers need to secure their requirements in the expensive secondary markets.

ACC numbers for August were published this week. August demand turned lower by 4.7% from July. Production was down in sync with demand which lead to a small inventory build of 7.4 million pounds.

Producers continue to be aggressive pushing through their margin expansion increases. As monomer prices equalize globally and PP margins continue to expand in the US, the US could start to lose its competitiveness. We will have to watch global spreads closely in the coming months. If the US becomes uncompetitive, commodity applications could become vulnerable to imports. Speaking of imports, we continue to see imported PP pellets coming into the US. It is still a slow process but gaining traction.

LBI recently announced a $0.06/lb PP price increase for October.

RTi Polypropylene Outlook and Suggested Action Strategies

30 Days: Monomer will be down for September. Polypropylene prices will move lower but not in line with the monomer drop for most. Much still depends on who you are buying from and how much of the margin increases you have taken to date. 60/90 Days: Demand trends will be important moving forward. Was August a blip or is the US seeing a drop in real demand that will carry into the 4th QTR. There is potential for monomer prices to fall further.

PVC prices responded to downward pressure in August to the tune of $0.01/lb to $0.02/lb with at least as much again in September. The ethylene contract for August settled down $0.0325/lb and spot pricing is averaging $0.10/lb to $0.11/lb lower in September than in July on ample supplies.

The scheduled outage season is approaching in Q4 for both crackers and PVC producers. One producer has seen some curtailment this month from an unplanned VCM production issue.

The impact of US outages will be defined by export demand/pricing. Low oil pricing and demand concerns led by China are yielding low priced ethylene/PVC competition for US exports. However, increased demand is expected as the monsoon season ends.

YTD through August, domestic PVC demand is even with last year, a disappointing result so far in a year expecting growth from the construction market. A substantial improvement in housing starts led by single family homes in July will help, but is late in coming and tempered by a fall-off in permits.

Exporters found more interest through discounting last month, breaking the 500 million pound mark in July, but falling below 450 million pounds in August, still 11% above the 18 month average.

PVC production fell by 5% in August as production issues surfaced focusing volume on domestic buyers.

PVC raw material costs moved down $0.016/lb from ethylene in August. September will see another reduction of $0.005/lb to $0.01/lb.

Chlorine: Prices are finally starting to see some easing, and are down 5% from the summer long average of $225/st. Strong supplies with diminishing seasonal demand is dragging prices lower.

RTi PVC Outlook and Suggested Action Strategies

30 Days: Pricing discussions should focus on lower cost in August and September. Over-supplied ethylene and export pricing below $0.33/lb are indicators of a need to bring domestic PVC pricing down, as cost to produce is 15% to 20% lower than last year. 60/90 Days: Scheduled maintenance will reduce supply at a time when domestic demand will be declining and export pricing will be held at lower levels from low oil pricing. Market direction will be defined by the degree of supply reduction balanced against the drop in demand.

In the PET market, contract settlements have finally arrived. The three month long delay in a settlement was blamed on the slow reactions of the Asian market and unfavorable market forces that created a slow trade scenario.

PX contracts settled:
June: $0.53/lb (up $0.04/lb)
July: $0.53/lb (flat)
August: $0.46/lb to $0.4675/lb (down $0.07/lb to $0.0625/lb)

PTA contracts settled:
June: $0.5022/lb (up $0.0268/lb)
July: $0.5029/lb (up $0.0007/lb)
August: $0.4585/lb (down $0.0444/lb)

PET contracts settled:
June: $0.7725/lb to $0.7825/lb (up $0.0327/lb)
July: $0.7752/lb to $0.7852/lb (up $0.0027/lb)
August: $0.7398/lb to $0.7498/lb (down $0.0354/lb)

Demand for US paraxylene has been slow through September. However the recent contract settlements may stimulate trades now that some certainty has returned to the market. The mixed xylene to paraxylene spread is improving, but not quite favorable for producers yet.

A PTA plant in China, with capacity of 2.2 million tons per year, plans on shutting down next week for maintenance, and will return to production by the end of the month (provided the market deems PTA production as profitable at that time). Two other PTA facilities in Asia are starting production, one in India which is near completion and another in China which was down for maintenance.

Asian PET producers increased their run rates up 6% from last month. This has increased downstream demand by a bit, especially MEG, whose inventories are still high from an enormous build in August. Spot MEG has been on the rise through September.

Volatility in crude oil prices has affected spot prices for PET feedstocks, with the weekly average floating around $45 per barrel.

Future raw material costs for PET are expected to continue to drop into November, where raw material costs may reach somewhat of a floor.

RTi PET Outlook and Suggested Action Strategies

30 Days: Spot prices are likely to react to the settled contracts. Oil volatility is still and issue that has caused upward movement in spot prices. 60/90 Days: Cost forecasts are expecting prices to trend lower into November, however prices are still subject to supply and demand and the global economy.
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