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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 19/09/2016 (18:21)
According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, in the PE market, lower operating rates due to disruptions and a significant pre-buy ahead of the September price increase led to a 300-million-pound inventory draw.

Market Overview

Suppliers have a $0.05/lb price increase pending in September. Expectations are that the full increase will be implemented.

The September 2016 price marks the highest PE price point since January 2015 when oil first reached $45/bbl, after falling from the $90/bbl mark.

An additional $0.04/lb increase for October 1st was announced by LBI, Dow, and Westlake.
Commodity film producers have announced a price increase of 6% for September.

LDPE, LLDPE, and HDPE availability remains tight. With inventory positions covered and disruptions slowly resolving themselves, it can be expected that inventories will begin a sluggish recovery.

Feedstocks

Spot Ethylene: The weekly spot price is up ~$0.02/lb, moving back into the high $0.30/lb range after LBI announced their cracker would not be restarting in September as expected, but will be delayed until November. Planned/unplanned outages also continue to keep supplies tight and to drive the ethylene price direction. The ethylene supply situation could remain in its current state well into November and possibly December.

Naphtha: Prices retreated $10/mt to $386/mt this week. Cost to produce ethylene is near $0.30/lb from naphtha.

RTi PE Outlook and Suggested Action Strategies

30 Days: Expect the September increase to be implemented due to supply disruptions and lower inventory. Buy resin in September and October to meet demand. Without further disruptions, prices have peaked. 60/90 Days: Prices 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. Resin suppliers have successfully held Q4 pricing flat for the last two years.

In the PP market, supply problems for propylene monomer persist.

Market Overview

As of early Friday, we have not heard of a PGP settlement for September. We expect to see a settlement anytime over the next several days. Regardless of when it arrives, it is likely to be the largest upward move the market has seen in the last year.

Total, Braskem, and LBI have $0.04/lb increases announced for September. Total amended their announcement to include an additional increase to include the change in PGP from August to September. LBI has issued a price notification calling for a $0.05/lb increase effective October 1st.

The secondary market has definitely seen slower activity in the first half of September. Prices are up off the bottom but still well below contract price levels. We believe there is still inventory out there that could free up over the next couple weeks.

Pinnacle and P66 have planned outages starting this month. We are also hearing there could be other producers cutting rates as well. It does make sense to cut now with September being a high cost to produce month, plus the market is still carrying excess pounds.

A slower production month in PP would also help balance the monomer market, which is tight on supplies.

Propylene

September PGP was nominated up $0.07/lb.

Spot PGP is up slightly this week to $0.4175/lb which puts the implied contract price at $0.44/lb.

Spot RGP is up two cents from last week to $0.345/lb.

Dow’s PDH unit was back down due to continued operational issues. It is expected to be restarted by 9-22-16.

With spot propylene strong and several remaining supply issues, a $0.07/lb increase in contract PGP is very likely.

RTi PP Outlook and Suggested Action Strategies

30 Days: September PP prices are moving higher. Much will depend on where PGP prices settle. Many price points will move with the monomer increase. 60/90 Days: Supply issues in the propylene market remain a concern. Higher PP prices could invite import volumes to ramp up. The market should be nearing the top in September to October timeframe.

In the PVC market, ethylene spot moved higher due to a fresh restart delay as PVC production held at high levels adding a substantial inventory build.

Market Overview

Increase nominations of $0.04/lb for October are seeing support from the ethylene spike due to outages, but are undercut by high production levels leading to a 17% inventory build for August in preliminary ACC data, 5% higher than last August.

Some upstream PVC maintenance is planned for October, but this comes at the end of the construction season and is not clear if PVC production will be affected.

Export pricing continues flat to down, also offsetting domestic price increase nominations. Global demand does not appear to support exports at current levels.

Raw material cost is up $0.02/lb in August since June with the ethylene spike overcoming lower chlorine in September by $0.005-0.01/lb.

Supply & Demand

Supply: Formosa is set to conduct upstream maintenance next month. Strong production maintained in August added more than 60MM lbs to inventory (ACC).

Demand: Demand was generally flat in August with modest increases in domestic demand offset by lower exports (ACC)

Feedstocks

Chlorine: Spot prices, although about $40/st below the summer peak, were unchanged from last week.

Ethylene: The weekly spot price is up ~$0.02/lb, moving back into the high $0.30/lb range after LBI announced their cracker would not be restarting in September as expected, but will be delayed until November. Planned/unplanned outages also continue to keep supplies tight and to drive the ethylene price direction. The ethylene supply situation could remain in its current state well into November and possibly December.

RTi PVC Outlook and Suggested Action Strategies

30 Days: PVC pricing is under upward pressure for October from climbing ethylene costs, but offset by strong production, the end of construction season, and lower export prices. Look for eventual improvement of ethylene supplies while pushing back attempts to increase price. 60/90 Days: Longer term we expect downward price pressure once ethylene supplies are improved by November and inventories continue to build.

In the PET market, Brazilian imports beat Asian import pricing. Current outlook shows flat PET for September.

Market Overview

Rising freight costs have pushed US spot assessments slightly higher, but also managed to put Brazilian imports ahead of Asian sourced PET, allowing Brazil PET to set the price floor once again. These freight rates are expected to ease heading forward.

Alpek is wrapping up negotiations with Petrobra for the purchase of the Petroquimica Suape (PQS) PET facility in Brazil (the main source of the low priced imports). The outcome should result in a return to the normal import balance seen before the influx of PET from PQS.

WTI crude oil prices edged lower through the week, starting around $46/bbl and ending close to $43/bbl. Refinery rates remain in the low to mid 90%’s. Lower crude and decent refinery rates put downward pressure on feedstock pricing.

Feedstocks

Paraxylene: Upstream mixed xylenes prices have been resisting the lower crude prices due to limited supplies. Additional PX capacity in Asia should be coming online in the next few months, which should help boost supply and put downward pressure on PX prices.

PTA: A number of PTA shutdowns in Asia have caused a short term rise in spot pricing, although the US assessments call for easing due to crude staying in the mid $40’s/bbl.

MEG: Despite rising ethylene prices in Asia, MEG pricing has been mostly stable for the past month, which indicates a squeeze on margins. US outlook looks mostly stable.

RTi PET Outlook and Suggested Action Strategies

30 Days: Crude oil has tipped below $45/bbl, but there is some doubt that PET feedstocks will move lower for September, instead there are some expectations for PET to move sideways. Keep an eye on feedstocks to see if they do react to the lower crude. 60/90 Days: Historically, PET pricing tends to relax through Q4, and current raw material cost outlooks show the same potential. Delay purchases (if possible) to realize the most of the potentially lower priced PET.
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