Weekly Market Drivers for the USA
Crude Oil: Prices hit a 12 year low near $26 this week and lightly rebounded to the high $20’s. "We are not going to accept to withdraw our production to make space for others," Saudi Arabia’s Khalid al-Falih said at a CNN panel.
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 another 10 year low selling below $0.16/lb. Excess supply prior to a maintenance season is not consistent with past years. Ethylene supplies continue to remain healthy.
Latin America: North America suppliers have reacted to the Middle East offer and are selling LLDPE in the lower $0.40’s/lb.
RTi PE Outlook and Suggested Action Strategies
30 Days: Manage inventories with expectations of more downward price pressure in February. Move January orders in to 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. With $30 oil and February price reductions may stabilize the market heading into March and April. 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, the market awaits January PGP contract settlement.
Dow’s new PDH unit was shut due to operational difficulties. Recent reports are suggesting a restart sometime in the next week.
Refinery Rates: US rates were down from 91.2% to 90.6%. PADD3 was down from 91.0% to 87.4%.
Propylene Inventory: Increased from 3.16 million barrels to 3.22 million barrels.
PGP: Spot PGP trades at $0.2825/lb and $0.28375/lb. This is down from earlier in the week.
RGP: Spot RGP is valued at $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.
In the PVC market, ethylene spot fell $0.0275/lb over the past 2 weeks and inventories rose in Dec. leading to flat expectations for PVC pricing in Jan.
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 despite spring maintenance.
Demand: Housing starts ended the year on a positive note, but will see some declines with current January storms. Overall for 2016 starts for single family homes are expected to increase at the expense of multi-family, leading to increased domestic PVC demand for 2016.
Chlorine: Spot pricing relatively unchanged since the post summer season price drop in September 2015.
Ethylene: Prices reached another 10 year low selling below $0.16/lb. Excess supply prior to a maintenance season is not consistent with past years.
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 outages that could generate upward price pressure along with anticipated growth in construction demand. PVC output should improve over 2015 along with added capacity.
In the PET market, quiet market as cheaper crude oil starts to impact feedstock pricing.
Paraxylene: The aromatics chain was the first to be impacted by the crude oil. Recent spot pricing is at a nearly seven year low as a result.
PTA: Hanwha Global Chemical in South Korea shut down one of its PTA plants this week (450,000mt/year) due to weak demand and margins.
MEG: Crude hasn’t made enough of an impact on MEG pricing as the market is mostly balanced. Some traders are expecting a rebound in pricing halfway through Q1.
RTi PET Outlook and Suggested Action Strategies
30 Days: PET pricing will shortly take full effect from cheaper oil, and at this rate, pricing will stay very reasonable for most of Q1. 60/90 Days: As lower crude is absorbed into the market, pricing should start to stabilize as producers adjust to the somewhat abrupt change in costs. That being said, prices are notably low and shouldn’t make any significant upward change in the near future, unless turnaround season tightens supply enough to offset crude oil.
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