Weekly Market Drivers for the USA
CP Chem report flooding issues at a Texas plant and Dow has a LLDPE butene issue. Neither of these events has impacted the overall resin availability.
China and SEA suppliers have also failed to implement at $0.02/lb to $0.03/lb increase. Weak demand and good inventories removed upward pressure.
European price increases remain pending due to modest increases in ethylene. Ample supply in Europe should keep prices at October levels.
Secondary market activity was low this week. Buyers restocked in October with the potential for the November increase.
Spot ethylene and ethane prices held steady this week, without any news worthy events.
Exports continue to move steadily without any price increases. Most PE exports continue in the $0.45/lb to $0.49/lb BRC Houston range.
Naphtha prices continue to move in step with oil prices; selling near $450/mt.
RTi Polyethylene Outlook and Suggested Action Strategies
30 Days: There are no drivers to support a December increase at this time. Suppliers will test the secondary markets in early November with higher prices. 60/90 Days: Manage inventories to meet demand. Watch for upward changes in oil prices. This action will be the leading driver for any chance of price increase. Q4 should remain at October prices. It is reasonable to expect suppliers to continue to pursue increases. Suppliers always need an increase in place if the opportunity presents it in Q1 or Q2 2016. Prices should remain flat until a time when oil approaches $60 per barrel. Current 2016 oil published forecasts range from the low to high $50 per barrel in 2016. Heavy Q1-Q2 ethylene schedule maintenances beginning in February should increase the spot ethylene prices; it will not affect the polyethylene prices.
October US PGP contract price – up $0.005/lb to $0.305/lb.
November US PGP contract price – Unsettled, nominated up $0.015/lb.
Spot PGP valued at $0.2925/lb. Spot RGP valued at $0.19/lb to $0.20/lb.
Refinery rates in the US were up slightly to 88.7% (US) and 92.3% in PADD3.
Propylene inventories reported by the EIA saw a big draw, down from 4.166 million to 3.731 million barrels. Outages at the cracker and FCC are responsible for the draw. There has been little impact on market prices, and the outages should be finishing up very soon.
Dow is projecting a year-end start-up of their new PDH unit. There is speculation that a year-end start is unrealistic. When it does arrive, this unit will add approximately 1.6 billion pounds of new propylene supply to the market.
Williams recently announced they will be proceeding with the next phase of development with its planned PDH unit near Edmonton, Alberta. Williams has signed an agreement with NAPP who will be building a polypropylene plant adjacent to the PDH. Planned start-up of both the PDH and PP units is late 2019.
LBI has restarted their PP units in Bayport, TX according to LBI CEO Bob Patel. The Force Majeure declaration remains in place for the immediate future.
RTi Polypropylene Outlook and Suggested Action Strategies
30 Days: November PGP contracts will likely settle higher by $0.01/lb to $0.02/lb. We are expecting that the current firmness in propylene will relax as unit restarts occur. Polypropylene prices will increase with monomer at a minimum and up to 3-5 cents more with margin expansion. 60/90 Days: Current projections for the balance of 2015 are for stable to lower propylene prices along with stable to higher PP prices. By the end of 2015, we think the six cents of margin increase that is currently in play will be largely implemented into PP prices.
October PVC is moving a penny lower as pressure on November for an additional reduction increases as export prices remain below $0.30/lb. With 2 of 3 maintenance outages largely complete, supply constriction from maintenance has yet to have a significant impact on the supply/demand balance as the construction season winds down.
Between the Shintech expansion this quarter and the Axiall next quarter, PVC capacity will increase by roughly 3% over the next 6 months, and by 4.5% over the next 12 months if we roll in Part 2 of the Shintech expansion. Hopefully the capacity addition will combine with better operating rates in 2016 (plenty of breakdowns in 2015) to improve the consistency of supplies to the market.
Downward PVC price pressure may see some resistance later in the quarter as feedstocks firm up, but will be offset by end of year deal making and improved supplies as the scheduled outage season concludes.
Low oil pricing and weaker demand led by China are continuing to yield low priced ethylene/PVC competition for US exports.
September exports fell more than production leading to an inventory build. Domestic demand was stable as exports fell 18% as global availability appears strong.
PVC raw material costs in October edged fractionally lower as November is expected flat.
Ethylene: Spot pricing witnessed a minor peak that occurred at the end of October, reaching close to $0.25/lb. Prices have recently eased from those levels, currently approaching the October monthly average of $0.22/lb.
Chlorine: For the past few weeks, prices have stayed consistent, hovering around $200/st, with no signs of significant changes in the near future.
RTi PVC Outlook and Suggested Action Strategies
30 Days: Pricing discussions should focus on continuing low feedstock pricing levels and even lower export pricing due to well supplied and competitive overseas markets. PVC cost to produce is 15% to 20% lower than last year. 60/90 Days: Scheduled maintenance is having minimal effect with November ending the schedule. Domestic demand is in seasonal decline and export pricing will continue at lower levels. Market share discussions for next year and the pull of low export prices will be top of mind for producers as the quarter progresses.
Spot PET rose by about a penny this week, surpassing the $0.50/lb mark.
The antidumping duty determinations have caused an increase in import pricing from affected regions, including China, India, Oman, and Canada. As a result of these duties, we haven’t seen any imports from China or India. Oman and Canada still managed to remain in the market at reduced numbers.
October contract prices for both paraxylene and PTA settled, PX down $0.01/lb at $0.42/lb and PTA down about $0.05/lb at $0.4279/lb.
Contracts for PET have yet to settle for October, despite the feedstock settlements.
An export arbitrage has opened up for US MX to Asia due to a price advantage. The MX-PX spread in Asia is barely favorable, which should restrict the total volume exported.
Tightening supplies caused the MX-PX spread in the US to drop below the healthy $150 range.
Asian paraxylene rose slightly over the week, responding to changes in crude oil prices and slight increases in downstream PTA prices.
A Force Majeure in LyondellBasell’s MEG plant in Pasadena, TX added to the already tight supply situation for US MEG.
Supply tightness from outages along with rising crude oil prices couldn’t stop the continued descent of Chinese MEG prices. Weak demand was the main factor keeping prices from climbing, although we should see prices flatten out through the end of the year.
RTi PET Outlook and Suggested Action Strategies
30/60/90 Days: Spot prices for PET may be on a month long trend, feedstock prices are looking to decrease into January of 2016. Raw material cost analysis shows that cost should bottom out in December, before January starts making a slight increase. Despite this, prices will remain at relatively low levels. Changes in crude oil prices will still have an effect on resin prices, as well as the market environment in Asia.
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