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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 18/07/2016 (18:59)
According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, the inventory data reported this week eliminated the April/May inventory gains. Demand rates in North America increased and exports were near average. The data contradicts the market conditions where processors have reduced inventories in anticipation of a now unlikely July price decrease.

Market Overview

Inventories were reduced over 150 million pounds in June. High demand in North American is cited as the main driver.

LDPE availability is noted as very scarce. Off grade prices have increased as much as $0.05/lb since June and export offers have been reduced.

HDPE resin offers for injection and blow molding have not been limited.

RTi sources report Westlake’s plant disruption could last through July. The main resin of concern is fractional melt LDPE. There is no additional restart information available.

The expectation of Braskem prime grade HDPE and LDPE resin is in July and August does not appear to be a reality as delays continue.

Middle Eastern and Asian ethylene cracker maintenance will begin in August through November. Limited ethylene is expected to firm Asian and European prices.

Feedstocks

Spot Ethylene: Prices remained unchanged due to strong inventory. Cost to produce ethylene from ethane remains near $0.10/lb in NA.

Naphtha Prices declined 5% since June, to $390/MT. Ethylene prices have remained firm due to an above average ethylene cracker turnaround season in Asia.

RTi PE Outlook and Suggested Action Strategies

30 Days: Continue with last week’s RTi’s strategy: Manage inventories and buy only as needed. Prices in July or August will not increase. 60/90 Days: Revised from last week: The duration of the April $0.04/lb could last into the fall as the global markets firm up and North American inventories remain lower than average. Previous RTi prices expectations that resin could fall as much as $0.07/lb in Q3 may be more of a challenge than expected.

In the PP market, Dow PDH unit goes down once more.

Market Overview

Dow PDH is down due to mechanical issues. Dow has not said when it will restart, but sources say it will be at least two weeks and possibly more.

Spot PGP moved slightly higher on the news, valued at roughly $0.3075/lb.

The July contract price was nominated at a rollover, but these recent developments could impact whether sellers try to get an increase. Current spot numbers would only support a $0.005/lb increase for contract PGP.

Polypropylene prices are expected to stay relatively flat this month. However, there are a good portion of buyers that will be seeing decreases in July to fully recover the downward movement from June.

Import volumes from May were strong with volumes over 100 million pounds.

We do expect to see volumes in June and July to show a significant as sellers try to clear out previous inventories.

In addition, prices available from overseas suppliers are not as attractive relative to the spot prices available domestically.

Supply & Demand

NA PP production for June was strong with an operating rate of 94.3%

NA PP demand was very strong with export volumes over four times what they were in January. Exports channels are being used to clear excess inventory.

Inventories are down 37 million pounds and Days of Supply fell to 35.3 days.

The overall market remains well supplied with a good supply of secondary market material available at discounted prices.

It does appear that the secondary market is finding a bottom in terms of price.

RTi PP Outlook and Suggested Action Strategies

30 Days: PP prices will be flat to lower in July. We do expect that industry indexes will also be showing a downward move pick up the balance from June. 60/90 Days: Monomer prices are expected to be generally stable during this time. The secondary market should find a bottom and possibly some support. Margin decreases in the contract market will likely slow down.

In the PVC market, Westlake FM reduced production in June, and is expected to do the same in July; hoping for a late month recovery. Feedstock markets flat as export pricing rises.

Market Overview

June pricing is seen as a partial implementation of the nominated $0.03/lb with the remainder expected in July based on the ongoing outage at Westlake.

Earliest potential timing for resolution of the PVC outage is the end of July at this point.

The primary outcome of the Brexit vote so far is expected to be slower global GDP growth and a stronger US$, further challenging US exports.

The supply/demand balance will remain center stage as export pricing is moving higher on restricted supply and improving demand.

Supply & Demand

Supply: Production fell back in June by 6% (ACC) with recovery not expected till August. Still up 6% YTD.

Demand: Exports are 13% over 2015 through June just dipping under 400M lbs. Domestic demand is up 4% YTD (ACC) based on improved housing starts and GDP growth.

Feedstocks

Chlorine: After seeing some minor easing from the previous week (moving away from the peak summer demand season), spot prices were unchanged this week and are likely to see some further declines through Q3.

Ethylene: Prices remained unchanged due to strong inventory. Cost to produce ethylene from ethane remains near $0.10/lb in NA.

RTi PVC Outlook and Suggested Action Strategies

30 Days: Price increase efforts have gained energy from the Westlake FM as export pricing moves above $0.34/lb. Expect implementation of the remainder of the June 3 cents in July. 60/90 Days: We expect to enter calmer waters once the FM is resolved with additional PVC capacity on-line and slower global growth. However, the potential for another penny or 2 in August exists, leading to a recommendation to buy ahead in July. Costs are expected to move lower by Aug/Sept on improving supplies.

In the PET market, raw material cost outlooks very stable; July PX initial settlements at $0.41/lb, down $0.0075/lb from June.

Market Overview

Domestic spot assessments have been easing for the past few weeks, tracking lower pricing and weakening demand in Asia, however domestic demand is still seasonably strong (combination of summer bottling affecting PET and summer driving season affecting PX/PTA).

The summer bottling season could spill into the remainder of Q3, steadily easing into August (at the latest). The polyester carpet sector seems to have fully developed, with demand showing nominal levels of growth this month.

WTI crude oil prices have been hovering just above the $45 per barrel mark this week, with this week averaging $3 per barrel less than the end of June. Refinery rates have been above 92% for the previous 3 weeks, ensuring decent feedstock supply availability.

Feedstocks

Paraxylene: The summer driving season continued to put upward pressure on upstream mixed xylenes pricing this week, but WTI crude prices staying below $50 per barrel helped pull July contracts lower.

PTA: The formula based contract price for July (based off the PX settlement) eased $0.005/lb lower, down to $0.4193/lb. Spot pricing saw some decreases from strong supplies and weak demand.

MEG: The current sentiment is bearish on MEG due to decent supply availability, however some volatility is possible.

RTi PET Outlook and Suggested Action Strategies

30 Days: Looking solely at the raw material cost outlooks, we can expect flat pricing for the next few months. However, from the market dynamic perspective (in terms of supply and demand), there is room for price easing as the driving and bottling seasons fade. 60/90 Days: The second half of the year historically has some levels of PET price declines. Couple that with the expectation for crude oil staying around $45 per barrel (by some analysts) for the remainder of the year, we could see pricing at or below current levels heading forward. Keep an eye on both the Asian markets and crude oil to determine the PET price direction.
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