Weekly Market Drivers for the USA

According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, imported finished film and bag offers with lower, more competitive prices have started to surface in North American markets.

Any increase in North American prices will escalate import finished product offers, which will take the place of NA business/volume. North American suppliers may be forced to respond with lower prices in January or February to remain competitive with imported finished products.

The June 1, 2015 announced $0.05/lb polyethylene price increase continued to rollover another month into January 2016. This increase has received limited attention the past seven months. At least one supplier has delayed this increase to February.

The year-end export market sell-off concluded with prices that reached a 6 year low; selling below $0.43/lb.

Spot prime offers and off grade sales were very strong at the year-end. The first week of January activity was reduced as buyers did not need to restock inventories.

Crude Oil: Price hit an eleven year low as worldwide inventories continue to build.

Ethane: Prices improved from the December lows, but remain in the mid-teens. Prices should continue to trend with natural gas this warmer than average winter.

Ethylene: Spot trades are below $0.20/lb. Expected upswings due to turnarounds have not transpired.

Secondary Markets:

Off grade markets were inactive the first week after a very active late December. Pricing and availability direction is unclear this week with very few transactions.

RTi PE Outlook and Suggested Action Strategies

30 Days: Manage inventories with expectations of downward price pressure in January or February. 60/90 Days: Global demand and the price of oil will continue to be a leading price indicator. Braskem’s new HDPE and LDPE capacities in Mexico are expected to be available and will be the first challenge of the export market from NA.

PP buyers head into the New Year with price increases on the table. Total announced a $0.06/lb price increase for February implementation. Most all of the other major suppliers have a $0.06/lb increase announced for January. We are seeing some suppliers splitting the six cents between January and February.

Recently negotiated contract formulas also took an upward adjustment in most cases.

Dow’s PDH is running but at low rates.

Refinery Rates: US was down by a barely 0.01% (US) and down 1% (PADD 3).

Polypropylene Inventory: Polypropylene inventories grew by 120 million pounds heading into December.

Coupled with soft November demand, this led to increased activity in the secondary markets.

PGP: Shell nominated up $0.005/lb for CGP and Exxon nominated flat for PGP. Spot PGP traded at $0.2925/lb. It would be difficult to achieve any upward movement in contract prices at these spot levels. RGP: Spot RGP has a bid/offer of $0.18/lb by $0.19/lb.

RTi PP Outlook and Suggested Action Strategies

30 Days: PP prices will be higher in January by varying amounts. PGP will be very close to flat. 60/90 Days: We expect monomer to be flat to down in coming months. PP prices could move higher with margin expansion, but we see market conditions starting to get more difficult for producers on this front.

In the PVC market, ethylene contract pricing for December settling at lowest levels in more than 10 years, offsetting price increase efforts.

With the December Ethylene contract falling nearly 3 cents, off season for construction, low cost and low demand in Asia leading to low export prices, producers have no basis for a January or February increase.

PVC raw material costs are down nearly $0.015/lb in December and likely to hold flat for January.
In fact, producers have every reason to lower prices in either year-end contract discounts or January pricing. Expectations for higher ethylene costs and stronger demand for the start of the construction season in Q2 will cause producers to roll increase announcements down the road and add to them to build a case for an eventual increase.

Supply: Excellent with all producers running and the maintenance season for VCM and PVC now past.

Demand: Seasonally slow with export demand contingent on keeping prices low.

Chlorine: Spot pricing relatively unchanged since the post summer season price drop in September 2015. European chlorine production has increased by ~1.7% from the start of 2015.

Ethylene: Spot trades are below $0.20/lb. Expected upswings due to turnarounds have not transpired.

RTi PVC Outlook and Suggested Action Strategies

30 Days: Pricing discussions will focus on lowest ethylene contract pricing in more than 10 years in the middle of strong supplies and seasonally slow demand. Low export pricing supports the cause. 60/90 Days: Domestic demand will remain slow into the early part of the year with potential for stocking in advance of cracker outages and anticipated growth in construction demand for 2016. PVC operating rates should improve over early 2015 along with added capacity.

In the PET market, current spot prices fall below the 2015 low, may reflect crude oil prices under $35 per barrel.

Expectations for further decreases into the first quarter of the year are backed by declining feedstock prices and cheaper crude oil.

Contract PET and its feeds settled down between $0.005/lb and $0.015/lb.

Domestic demand is likely to improve after the antidumping determinations last year made imports from China, Canada, India, and Oman less favorable. We have also seen a shift in imports to other Asian regions as well as South America. Feedstocks

Paraxylene: Spot relatively flat, on par with Asian prices. December contract settled down $0.01/lb at $0.41/lb. PTA: After the paraxylene (PX) contract settled, PTA settled an equivalent $0.0067/lb lower at $0.4145/lb. MEG: December contract settled at $0.3398- $0.3448/lb, with spot moving lower. Nan Ya Plastic’s MEG facility in Taiwan (20,000mt/yr capacity) will restart on January 25th.

RTi PET Outlook and Suggested Action Strategies

30 Days: Prices are likely to continue their decline into February. 60/90 Days: Current outlooks show that February could bottom out in terms of pricing, but seeing crude oil at such low levels casts some doubts in the likeliness of that scenario. Keep an eye on oil and the Asian market to see how PET resin pricing will respond.