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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 22/08/2016 (16:48)
According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, severe Louisiana flooding, Exxon’s supply disruptions in TX and LA, and forecasting from a recognized industry pricing index for the September $0.05/lb price increase, has prompted suppliers to take a firm position to improve margins regardless of the domestic and global trends. Expect the $0.05 to be implemented.

Market Overview

Exxon had an unplanned outage in Beaumont, TX. Initial indications are impacting the blow molding market the greatest. Exxon’s plant in Baton Rouge, LA continues to have difficulties as the flood waters retreat.

Stretch films producers announced a September price increase.

Inventory gained over 170 MM lbs in LLDPE and HDPE resins alone. LDPE was unchanged due to a severe Westlake supply disruption.

Days of inventory are 3 days above the 3 year average near 34 days.

Demand rates are 4% below the three year average of 92% of production.

Exports are only 2% above the three year average near 22%.

Producer operating rates remain at the 3 year average level of 92%.

Secondary market pricing moved up from the early July levels but are near the mid-June levels.

Global prices are expected to decline due to lower feedstocks and weak demand. Any increase in domestic pricing would be challenge NA demand.

Feedstocks

Spot Ethylene: Disruptions continue to support high spot ethylene prices above $0.33/lb. Ethane prices declined several cents this week as oil and natural gas prices remained lower.

Naphtha Prices have fallen over $50/MT in the last four weeks to near $355/MT. Asian ethylene prices remain firm due to an above average ethylene cracker turnaround season in Asia.

RTi PE Outlook and Suggested Action Strategies

30 Days: Expect the September increase to be implemented due to supply disruptions. 60/90 Days: The price increase announcement changed the market discussion. Price could remain at or above the August level through October despite inventory gains. Suppliers will desperately fight to keep any margin gains.

In the PP market, contract PGP for August settles up $0.035/lb to $0.37/lb.

Market Overview

At least three polypropylene producers have issued a $0.04/lb price increase for September 1st. At least one of the announcements states the increase is in addition to any change in PGP prices from August to September. Other announcements make no reference to monomer prices.

August polypropylene contract prices are not moving consistently throughout the industry. Some price points continue to follow PGP and will move up accordingly. Others that use an “index minus” formula will also likely move up. Then there are other PP price points that have removed monomer from the pricing discussion and without an August price increase letter, these price points are rolling flat from July.

The secondary markets continue to have well priced material available, but certain grades are not as available as previous weeks. Although still heavily discounted to contract prices, spot prices, on average, are moving higher.

Propylene

Contract PGP at $0.37/lb is still below current spot prices. Spot PGP is being bid at $0.39/lb with offers above $0.40/lb.

Spot RGP is being bid at $0.285/lb.

Dow’s PDH unit restarted this week, not last week as previously reported. We have not been able to confirm whether this unit is producing on-spec material.

LBI metathesis is reportedly down.

Motiva was forced to shut down and evacuate their Convent, LA refinery due to a fire. There are other unplanned outages at the refinery and cracker level, too many to list.

Starting in September, there are three more planned steam cracker TARs.

EIA propylene inventories dropped to 2.283 million barrels, a level not seen since 2014.

RTi PP Outlook and Suggested Action Strategies

30 Days: August PP prices will be flat to up $0.035/lb. PGP prices look to take another step higher in September. This could lead to another round of PP price increase letters. 60/90 Days: Supply issues in the propylene market remain a concern. If problems linger, higher propylene prices would lead to higher polypropylene prices in the coming months.

In the PVC market, crude Oil prices pushing toward $50.00/bbl amid a potential OPEC production freeze.

Market Overview

Rising CO prices will push ethylene prices higher in other regions that are more heavy feed dependent. This is already setting the tone for higher NA export price offers this week.

Contract ethylene prices for July are at a rollover ($0.3025/lb). However, with August spot prices systematically moving higher week over week, the market should brace for a higher contract price for August.

The higher export prices have thinned the buying interest, but with the limited supply position, getting material to export would have been a challenge.

Supply & Demand

Supply: Availability is pegged as limited. Production issues have not yet been fully resolved. There is also logistical issue due to severe weather in the Louisiana which is preventing deliveries to warehouses.

Demand: Demand is pegged as normal for this time period, but expectations are already for demand to drop off significantly in Q4.

Feedstocks

Chlorine: Spot pricing moved $10/st this week as demand continues to soften as we move further away from the peak summer demand season.

Ethylene: Spot prices have been trading higher all week. This trend could continue throughout the month as unplanned/planned outages have shifted the supply position from long to short. Exxon and LBI both have now become buyers of ethylene to cover some short positions. As expected, the July Contract prices have been nominated at a rollover ($0.3025/lb).

RTi PVC Outlook and Suggested Action Strategies

30 Days: Feedstock prices and higher export offers could push PVC prices higher in the coming weeks. Consider buying a little more than usually to cover your August and September needs if possible. 60/90 Days: Buy conservatively as prices in Q4 are expected to be pressured downward from a demand perspective and lower ethylene prices.

In the PET market, waning seasonal demand, competitively priced imports, and low (but rising) feedstock prices lend to flat to lower August PET contracts.

Market Overview

Low priced imports from Brazil continues to impact the domestic PET market. However, Alpek is negotiating with Petrobas for the sale of the Petroquimica Suape PET facility in Brazil, which represents almost half of the PET capacity in Brazil. If finalized, it could reduce the influx of low priced PET imports into the US.

The summer bottling season and summer driving season are showing signs of waning. The delay of the M&G Corpus Christi facility should bypass the slower Q3/Q4 demand season, with production likely to begin in Q1 2017 that should have resin available just before summer 2017.

WTI crude oil prices broke above the $45/bbl level, currently hovering at ~$48/bbl. Refinery rates are still in the low to mid 90’s, which would indicate decent supply availability for feedstocks, albeit more costly due to the rise in oil prices.

Feedstocks

Paraxylene: Crude oil prices moving closer to the $45/bbl range created bullish sentiment of upstream mixed xylenes, but MX prices remained at low price levels seen after crude moved down towards $40/bbl.

PTA: Earlier outlooks for PX/PTA called for steady declines heading in to September, although recent crude oil prices and bullish Asian markets could put upward pressure through Q3.

MEG: The Asian contract price for MEG in September settled at a rollover. Domestically, upcoming and current turnarounds are restricting supply availability, but light trading activity seemingly balanced the affects and kept pricing mostly stable on the week.

RTi PET Outlook and Suggested Action Strategies

30 Days: An August decrease is less likely, and current outlooks show potential for increases into September and possible October. Keep an eye on crude oil movements and outlooks to help determine future PET price moves, otherwise we can expect flat to higher prices. 60/90 Days: Historically, PET prices have moved lower after the summer peak. Now will the supply/demand balance be able to offset the rising crude oil?


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