Weekly Market Drivers for the USA
Naphtha prices have aligned with oil prices after a fall maintenance season. North American markets need price reductions of more than $0.05/lb to remain globally competitive. Global markets expect continued price decreases as oil reaches a 12 year low. Naphtha prices are also near a ten year low, putting downward pressure on ethylene.
Secondary market prices are now below $0.50/lb for most commodity LLDPE and HDPE resins. There is good availability and lower prices continue. Sellers are offering below market prices trying to attract buyers.
Middle East suppliers are selling LLDPE into Latin America at $0.41/lb (BRC equivalent), $0.07 lower than the November price.
Crude Oil: Oil markets reached new lows and some industry experts forecast lower prices before a recovery.
Ethane: Steady pricing coupled with low natural gas prices should continue. Cash cost to make ethylene from ethane is below $0.08/lb.
Ethylene: Prices reached a 10 year low selling below $0.17/lb. Excess supply prior to a maintenance season is not consistent with past years. Ethylene supplies continue to remain healthy.
RTi PE Outlook and Suggested Action Strategies
30 Days: Manage inventories with expectations of more downward price pressure in February. Secondary market buyers can be very aggressive covering resin needs. 60/90 Days: Global demand and the price of oil will continue to be a leading price indicator. There are no drivers present that suggest any price increase potential. 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. Material is expected by March from the new plant in Mexico.
In the PP market, Ineos announces Force Majeure on copolymers in Chocolate Bayou due to equipment failure.
Dow’s new PDH unit was shut due to operational difficulties. Sources say it is expected to be down for one week.
Spot polypropylene in the secondary markets continues to be offered at discounts.
Polypropylene imports are being heavily discussed amongst US buyers. Interest from foreign producers appears to be growing.
Refinery Rates: US rates were down from 92.5 % to 91.2%. PADD3 was down from 93.6% to 91.0%.
Propylene Inventory: Increased from 3.15 million to 3.16 million barrels.
Polypropylene Inventory: Polypropylene inventories decreased by 24.7 million pounds.
PGP: Talks of a flat January settlement prevail but nothing official at this time.
Spot PGP trades at $0.29375/lb and $0.295/lb.
RGP: Spot RGP is bid at $0.185/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 spot pricing fell $0.02/lb over the past week and inventories rose in Dec. further undercutting price increase attempts.
With the December Ethylene contract falling nearly 3 cents (with a further reduction likely in Jan.), off season for construction, low export prices, producers have no basis for a January or February increase at this time.
PVC raw material costs are down nearly $0.015/lb in December and are now expected to fall $0.02/lb across Jan/Feb. In fact, producers have every reason to lower prices in either year-end contract discounts or Jan/Feb pricing.
Expectations for higher ethylene costs due to the turnaround season and stronger demand for the start of the construction season in Q2 will cause producers to push increase announcements down the road to build a case for an eventual increase.
Supply & Demand
Supply: Excellent with all producers running. December production increased by 13% according to the ACC. For all of 2015, output fell 2.4%, the second annual decline in row and a trend that should reverse in 2016 with capacity additions.
Demand: Seasonally slow, but with year-end inventory clearing that boosted exports by 25% and domestic demand by 5%. For all of 2015 total demand fell by 1.8% with export demand falling for the 3rd year in a row according to the ACC.
Chlorine: Spot pricing relatively unchanged since the post summer season price drop in September 2015.
Ethylene: Spot prices traded at $0.165/lb, the lowest price since 2008.
RTi PVC Outlook and Suggested Action Strategies
30 Days: Pricing discussions will focus on lowest ethylene contract pricing in more than 10 years falling further in January as supplies are strong demand seasonally weak. 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 generated price pressure and anticipated growth in construction demand. PVC output should improve over 2015 along with added capacity.
Crude oil approaching $30 per barrel brings PET feedstocks lower
The bearish outlook on oil continued this week, with prices that haven’t been this low in over a decade. WTI crude oil supplies are on the rise and has created an imbalance with weaker demand.
PET Import pricing has been pegged at around the high $0.40’s per pound.
The antidumping determinations have made some minor increases in domestic PET demand. Imports initially had shifted to regions like Taiwan and Brazil, but recently Brazil has been seen exporting more material to Europe than the US.
Paraxylene: Spot hasn’t seen much movement, as cheaper upstream mixed xylenes was countered by an increase in Asian PX prices.
PTA: While PX is affected by opposing forces, thanks to the instability in the crude oil market, PTA reflects the flatness of PX this past week.
MEG: Spot prices are at an over 6 year low. The US ethylene contract for December settled $0.0275/lb lower at $0.2575/lb this week. Supplies are expected to remain tight as we move into turnaround season for Q1 2016.
RTi PET Outlook and Suggested Action Strategies
30 Days: Prices are likely to continue their gradual decline into February. 60/90 Days: Domestic markets for PET should be improving as imports from Brazil are slackening. Cheaper crude oil and a weakened Asian market should keep prices at these low levels for most of Q1, until turnarounds approach and restrict supply and have a slight upward force on prices
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