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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 05/10/2015 (18:23)
According to Resin Technology Incorporated’s (RTI) monthly market driver wrap-up report for plastics processors, September prices settled down $0.04/lb for all PE resins, following the $0.05/lb decrease in August.

PE buyers have settled and market conditions are very quiet with little volatility expected.

Only Dow has a new price increase for $0.07/lb pending for October. This increase will not be implemented. Exxon has reinstated an earlier announced $0.05/lb increase for November 1st.

This price structure from the September 25th RTi Drivers will be important to follow as a key driver for pricing; the cost to make the oil/naphtha pellet is $0.47 today, PE is selling in SEA China in the low $0.50’s , which can’t go down much more and is firming. NA is selling commodity grades in the high $0.50’s to low $0.60’s, LA is getting pellets delivered in the mid $0.50’s, very close to global prices. The global price set by the oil/naphtha pellet has set a floor that protects imported finished good from entering the North American market and allows North America to export as needed due to the natural gas/ethane advantage. This situation helps balance inventories and firm resin prices.

North American export prices are trading in the $0.45/lb to $0.48/lb range for most LLDPE and HDPE resins in September.

European prices are still declining following the steep increase earlier this year due to multiple supply disruptions. European ethylene prices are down $160/mt from the $1,105/mt peak in May.

Secondary market activity has slowed late in the month. Buyers who participate have restocked and are buying to meet demand. Prices for most off grade resins are selling for $0.51/lb to $0.55/lb and should continue near this level.

Inventory

August only saw a somewhat minor gain of 55 million pounds, as shown by preliminary August data from the ACC (HDPE +74; LDPE +8; LLDPE -27). HDPE was the main driving force behind this increase, with LDPE having little effect, and higher than average exports LLDPE prevented the total PE inventory number from increasing substantially.

Feedstocks

Ethane: Although the monthly average price for September is slightly less than August, spot prices have been trending upward through the end of the month. However, prices are still relatively low, staying healthily below the $0.20/gal mark.

Ethylene: During the past week, spot price have either been at or below the ethane price ($0.195/lb). The monthly average price is $0.04/lb lower than the previous month. Ethylene supply is abundant. Even with several unplanned outages the market barely noticed. There is so much ethylene in the supply stream that alternative storage measures are being sought. The forward outlook price is pegged static to the current prices.

In the PP market, contract PGP was settled down $0.03/lb to $0.030/lb for September. Heading into October, we have heard of one nomination calling for a flat settlement. The most recent spot trade for PGP was done yesterday at $0.28/lb which is line with a flat settlement. Early Friday, spot PGP was being bid at $0.2775/lb. Spot RGP traded several times in a range of $0.175/lb to $0.1825/lb.

PGP values in Asia were steady to slightly down with FOB Korea being valued at $505/mt ($0.229/lb). We have heard of some rate cutting taking place at propylene producing units due to oversupply in the Asian region. In Europe, PGP prices are slightly up on the week with current values at €582/mt ($0.296/lb). The October PGP contract price in Europe was settled at down €110/mt to €710/mt ($0.36/lb).

Propylene in the US is finding some support with refinery rates down to 89.8% (US) 92.5% (PADD3). We are also hearing that cracker feedslates are moving more towards ethane cracking with propane and butane losing their advantage. Nevertheless, EIA propylene inventories did post an increase up to 4.69 million barrels. This is possibly due to low ethylene prices. Ethylene is long and we would expect that metathesis is again running hard.

WTI Oil prices have remained fairly steady the last several weeks between $45 per barrel and $46 per barrel. WTI was currently trading at $44.14 per barrel.

In polypropylene, at least four producers have announced price increases for October calling for $0.05/lb. to $0.06/lb above the movement in monomer.

Noticeable this week was improved availability of spot material making its way into secondary markets. Offers were seen at a discount to contract prices which is something the market has not seen for a while. The material being offered appeared to be isolated to certain grades. Overall, the market continues to be tightly balanced.

Feedstocks

RGP: Spot RGP traded several times in a range of $0.175/lb. to $0.1825/lb. Propylene in the US is finding some support with refinery rates down to 89.8% (US) 92.5% (PADD3). We are also hearing that cracker feedslates are moving more towards ethane cracking with propane and butane losing their advantage. Nevertheless, EIA propylene inventories did post an increase up to 4.69 million barrels.

In the PVC market, 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 based on lower cost feedstocks and slowed global demand/increasing supplies and lowering export prices. October is under-pressure to give up another penny depending on the degree of supply constriction from maintenance outages.

Downward price pressure will see a floor from the domestic scheduled outage season in October/November for PVC producers. One producer went into turnaround early due to some unplanned production issues. Others are starting this week.

At least one PVC producer has seen its’ stock downgraded due to expectations of reduced earnings in part from lower priced feedstock. Something to watch for is for upward chlorine price pressure from reduced caustic production due to a slowdown in downstream use in aluminum production. Caustic is a co-product of chlorine production.

The impact of US outages will be defined by export demand/pricing. Low oil pricing and demand weakness led by China are yielding low priced ethylene/PVC competition for US exports. A couple of holiday periods in Asia and the ME have reduced market interest in the short term as well.

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.

Housing starts fell in August month over month but continued above the 1MM unit annual pace. Permits increased, helping bolster expectations for fall construction demand.

Producers continued to find export interest through discounting last month, but volume fell more than 10% from July. August was 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 as raw material production is strong. October is likely to see a similar decline.

Feedstocks

Chlorine: Seasonal demand has faded, and spot prices have started to recede in response. By the end of September, spot prices fell almost 15% from the height of the Summer demand price peak.

Ethylene: During the past week, spot price have either been at or below the ethane price ($0.195/lb). The monthly average price is $0.04/lb lower than the previous month. Ethylene supply is abundant. Even with several unplanned outages the market barely noticed. There is so much ethylene in the supply stream that alternative storage measures are being sought. The forward outlook price is pegged static to the current prices.

In the PET market, raw material costs continued their descent this month, falling another $0.02/lb to $0.03/lb due to lower cost feeds across the board. They are easing from their initial fall, however, and projections show an upcoming trough.

Recent spot prices have come down merely 2% from the end of August. The main driver of these prices is more due to lower cost feedstocks than market forces, which were mostly stable through September. Seasonal demand is down, but suppliers were prepared to compensate, creating a balanced market environment. September contracts settled down at a split $0.70/lb to $0.715/lb.

The Countervailing Duty Investigation only barely seemed to improve demand for domestic PET.

Finally determinations should be available nearing the end of December, with two more in February. Imports did shift to Taiwan, Thailand, South Korea, and Oman, although Oman’s involvement in the CVD investigation has made some buyers weary.

Asian PET has been mostly flat through September, after prices dropped nearly 15% from the start of July to the end of August. Chinese PET production managed to increase about 20%, but should dip back down with the upcoming holidays.

Feedstocks

PTA: After the PX September contract settlement occurred, PTA is expected to settle down $0.0226/lb at $0.4359/lb. Looking forward, PTA is likely to experience a steady decline into November for both US and Asia, with PX showing a similar yet less steep trend.

EG: Spot prices experienced a minor peak in the middle of September, after a trough developed at the end of August. Contracts settled at $0.3945/lb in the US. Turnaround season has arrived, tightening available supplies. However, supplies have been mostly keeping up with demand, keeping prices from making any drastic moves.

PX: We have contract settlements all the way up to September after the nearly four month long wait time. September PX fell to $0.43/lb. Spot prices were a little unstable this month, but both Asia and US PX prices were on average lower than August. Prices have been ticking back up, part of a trending incline, mostly as a result of turnaround season restricting market supply.
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