Weekly Market Drivers for the USA
August prime prices were unchanged from July.
Suppliers have a $0.05/lb price increase pending for September. Expectations are that the $0.05/lb price increase will be implemented due to supply disruptions and an opportunistic margin expansion
An additional $0.04/lb increase for October 1st was announced to support the September announcement.
Off grade markets prices increased as much as $0.05/lb for some resins in August after a surge in buying was created by the September price increase letter.
August inventories are expected to be lower. August turned out to be a very active month for exporters, distributors and brokers.
Stretch films producers announced a 6% September price increase. Suppliers see this as support and acceptance for the September increase.
Braskem in Mexico has committed to LDPE and HDPE local deliveries in September.
Exxon, LBI and CP Chem have plant issues with very few details available regarding down time expected.
Spot Ethylene: Multiple disruptions have limited ethylene distribution. Spot prices reached $0.40/lb, a two year high.
Naphtha Prices increased $20/mt in the last week to near $410/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 and reasons stated in the drivers. Monitor railcar delays due to flooding. Buy resin in September to meet demand. Without further disruptions, prices have peaked. 60/90 Days: The price increase announcement changed the market discussion. Price could remain at September +$0.05/lb level through October/November despite potential inventory gains. Suppliers will desperately fight to keep any margin gains and might hold onto the next increase through December.
In the PP market, September PGP nominated up $0.07/lb.
LBI has issued a price notification calling for a $0.05/lb increases effective October 1st.
Total Petrochemicals & Refining USA, Inc. (TPRI) issued a notification dated August 25, 2016 that informs polypropylene customers that their original announcement of a $0.04/lb price increase is being amended to include an additional increase of the change in PGP from August to September. Effectively the increase will be four cents per pound plus the change in PGP from August to September.
Pinnacle Polymers is schedule to take their Garyville, LA plant down in October for repairs and upgrades.
In the secondary markets, material continued to flow at a good pace in the last two weeks of August. In general, spot prices did not see the $0.035/lb increase that many contract prices did making for some great buying opportunities.
Polypropylene imports are getting talked as US prices are expected to take another jump in September. We expect that importers will take a more cautious approach to imports this time around.
August Contract PGP settled up $0.035/lb to $0.37/lb. Spot PGP was bid $0.415/lb and offered at $0.435/lb late in the week.
Spot RGP was traded several times at $0.3325/lb.
Propylene inventories reported by the EIA were steady this week at 2.203 million/bbl.
Various outages from the refinery, steam cracker, and metathesis continue to create tightness for propylene monomer.
Both PDH units are running.
RTi PP Outlook and Suggested Action Strategies
30 Days: September PP prices will be higher. Much will depend on where PGP prices settle. Many price points will move with the monomer increase, but it could depend on how much excess inventory remains in the market. 60/90 Days: Supply issues in the propylene market remain a concern. A continued rally in spot PGP could lead to higher prices in October.
In the PVC market, ethylene spot stabilized at high levels over the past week as ethylene contract pricing for August is expected up $0.0275/lb and 3 of 4 PVC producers have nominated a $0.04/lb increase for Oct 1st.
Increase nominations surfaced as producers contemplated higher ethylene costs in August/September due to unplanned outages.
Considered a stake in the ground and an attempt to gain back margin loss from ethylene hikes before year end negotiations, the nomination will be undercut by the winding down of the construction season demand and recovery of unplanned ethylene outages.
Export pricing is stable as lower oil this week will help to pull off-shore PVC pricing lower as ethylene availability improves.
Raw material cost is up $0.02/lb in August since June, with a fractional increase expected in Sept, setting a peak before declining in Q4.
Supply & Demand
Supply: Westlake has completed acquisition of Axiall to become No. 2 in NA for PVC as their FM from earlier in Q3 has been formally lifted.
Demand: Although residential construction figures have remained steady, construction employment has continued to fall in July and August, indicative of issues in non-residential construction and a negative indicator for PVC consumption.
Chlorine: Spot pricing slid $20/st this week as we approach a seasonal slowdown in demand, as chlorine sales for pools and construction start to fall.
Ethylene: Multiple disruptions have limited ethylene distribution. Spot prices reached $0.40/lb; a two year high.
RTi PVC Outlook and Suggested Action Strategies
30 Days: PVC pricing is under upward pressure for October from climbing ethylene costs, but with expected offset from good production, seasonally reduced demand and the upcoming year end negotiations. Look for any further worsening of ethylene supplies or unplanned PVC outage that might push the market. 60/90 Days: Longer term we expect downward price pressure once ethylene supplies are improved by November and the construction season demand winds down.
August PET settles ~$0.015/lb lower from July on lower PX/PTA, stable MEG, and softening demand.
Low priced imports from Brazil continues to impact the domestic PET market, setting the price floor, and remaining mostly flat on the week.
Demand, although deemed decent for the time of year, has been softening through most of the month.
WTI crude oil prices have been easing down from last week’s average of about $48/bbl, currently down to ~$45/bbl. Refinery rates have remained in the low 90’s.
Paraxylene: MX values saw some minor improvement due to an unplanned outage, but should return to a more downward trajectory heading into September. PX has been seen in route to Asia, which along with the higher MX could push September PX prices higher.
PTA: Although September could see an increase in PX/PTA, weakness is expected to continue heading into October.
MEG: The MEG forward outlook is showing stability into October, indicating that the PX/PTA movements will have a greater impact on the PET price direction.
RTi PET Outlook and Suggested Action Strategies
30 Days: September PET is showing signs of a minor uptick, but still staying below the summer highs. Crude oil easing towards $45/bbl could hold some doubt on these initial expectations. Either way, it is likely that the remainder of year will have lower pricing than the summer months. 60/90 Days: October should resume the post-summer decline in pricing. Either buy before the potential September increase nominations arrive or hold out for further decreases heading into October/November.
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