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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 31/10/2016 (18:44)
According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, export PE prices fell this week as resin availability improved. The PE export price is now greater than the historical range of $0.07-$0.10/lb below North American prime commodity prices. This is an early sign of the expected downward price movement.

Market Overview

October prices were unchanged from September. The September $0.05/lb. price increase was sustained.

Southeast Asia pricing improved in October $0.02-$0.03/lb. to $0.53/lb. with higher naphtha prices and improved demand.

Spot ethylene prices fell more than $0.10/lb. to $0.28/lb. in October as restarts started and unplanned outages were resolved.

Off grade pricing for HDPE and LDPE declined $0.01-$0.03/lb. in October due to improved availability as unplanned outages were resolved. LLDPE prices were firm due to availability.

The October $0.04/lb. increase announced by LBI, Dow and Westlake did not receive any industry support.

"Braskem Idesa had a small shut down for maintenance, for two weeks in the second half of October," spokeswoman Yeraseth Bello said, adding “the cracker would be down for a two-week period and the polyethylene lines would be down for 10-12 days.”

Feedstocks

Spot Ethylene: Traders are expecting a return to the $0.25/lb range by year end. Q1 2017 turnaround season will be limited with additional capacity expected by April/May 2017.

Naphtha: Prices increase $5/MT to $450/MT this week keeping pace will oil prices. Cost to produce ethylene increased $0.015/lb. to $0.315/lb. from naphtha. PE pellet cost to make is near $0.47/lb.

RTi PE Outlook and Suggested Action Strategies

30 Days: Continue the same strategy. Buy resin in November and December to meet demand. Without further disruptions, prices have peaked this year. November may be the earliest to expect inventory growth. 60/90 Days: Prices could remain at September +$0.05/lb. level through December despite potential inventory gains. Spot deals later in the years may be available before contract prices decline. Suppliers will desperately fight to keep any margin gains and hold onto the September increase through December. Q1 2017 will be a challenge to hold price levels without increases in oil prices.

In the PP market, October PGP settlements see some agreement at down $0.015/lb but not market-wide.

Market Overview

The expectation is that October PGP will move lower by at least $0.015/lb. Contract polypropylene prices will follow PGP lower. At least one of the major PP indexes has suggested they will move their PP index in sync with PGP.

Contract pricing for 2017 is currently being negotiated. Domestic producers appear motivated to regain market share that was lost to imports. More flexibility is being offered on contract terms and as well as lower prices. We expect to see margin come out of domestic prices in 2017 contracts.

It is also clear that excess material remains in the marketplace. We have started to see multi-car offerings at heavy discounts in an effort to move material prior to year-end.

We are seeing a few import offerings presented to the market, but current price points are not competitive with spot market opportunities.

Propylene

Spot PGP traded lower to $0.365/lb but has since seen offers at $0.38/lb.

Spot RGP is down about a penny from last week to $0.265/lb.

EIA inventories saw another strong build with levels reaching 3.43 million/bbl.

Refinery & Steam Cracker TARs are nearing completion. Propylene supply is improving and price is
responding.

One concern is that propane and butane are losing their competitiveness to ethane as a cracker feed. A switch to max-ethane would hurt propylene supplies in coming months.

RTi PP Outlook and Suggested Action Strategies

30 Days: Polypropylene prices are moving lower with propylene monomer in October. Improved monomer supplies suggest another decrease is in store for November. 60/90 Days: Depending on the movement in November, we could also see further downward movement in December. This along with the potential for margin erosion in the PP price will bring NA PP prices in much better balance with global prices.

In the PVC market, ethane and ethylene spot fell $0.0125-0.0175 over the course of the past week, improving expectations for a lower ethylene contract settlement and putting a further damper on efforts to hike PVC.

Market Overview

PVC increase nominations of $0.04/lb for October continue to lose traction as export pricing remains near $0.35/lb (with underlying efforts to increase facing headwinds in overseas markets) and ethylene spot fell nearly $0.02/lb this week. PVC is expected flat to up $0.015/lb.

Final ACC data showed an 11% increase in Sept inventory as production dropped 6%, but demand fell 6% due mostly to a 16% decline in exports.

PVC raw material costs are expected to fall $0.04-0.05/lb from the Sept peak by the end of the year as ethylene supplies continue to improve.

Supply & Demand

Supply: ACC reported a decline of 6% in output for September in final numbers as some maintenance is planned in Q4 around capacity expansion.

Demand: Inventories increased by 11% as production outstripped demand for the 3rd month in a row in Sept as the closest export markets showed softer demand.

Feedstocks

Chlorine: Spot prices, although about $40/st below the summer peak, were unchanged since early September.

Ethylene: Traders are expecting a return to the $0.25/lb range by year end. Q1 2017 turnaround season will be limited with additional capacity expected by April/May 2017.

RTi PVC Outlook and Suggested Action Strategies

30 Days: PVC pricing nominations are being undercut by continuing drops in feedstock cost and growing inventories. PVC pricing are expected flat to up $0.015/lb as negotiations continue. 60/90 Days: Raw material costs will fall by $0.04-0.05/lb the end of Q4, allowing for removal of any enforced increases and also some potential decreases. Ethylene supplies will remain improved.

October PET up $0.005-$0.009/lb; domestic markets still monitoring the Alpek/PQS negotiations alongside lower priced crude oil (<$50/bbl).

Market Overview

PET, MEG and PTA supplies have seen some tightening after Hurricane Matthew disrupted many plants along the east coast. Facilities in Europe and Asia were also impacted by outages and FM’s. Seasonal PET demand persisted for most of October (although slowing), mainly due to the warm weather.

Spot PET has been mostly steady for most of October, as the market continues to await the Alpek/PQS negotiations in Brazil. If concluded, domestic and Asian import PET would regain market share.

WTI crude oil prices have made little movement for much of October, but have slowly receded to just below $50/bbl. Refinery rates are still somewhat weak in the mid 80%’s.

Feedstocks

Paraxylene: Upstream mixed xylenes have experienced some minor upward movements for most of October due to some supply issues, which has in turn increased the production costs for PX.

PTA: PTA contracts formula pricing for October was updated to $0.4149/lb, a very minor change of $0.0016/lb. The higher PX costs have a potential to increase downstream PTA prices as well.

MEG: Improved supply positions and crude oil staying around $50/bbl pushed upstream ethylene prices lower through the week. But several supply issues have kept MEG inventories low and prices are experiencing upward pressure.

RTi PET Outlook and Suggested Action Strategies

30 Days: Current raw material costs outlook point to stability heading in to November. Keep an eye on crude oil prices; staying at or below the $50/bbl mark could influence feedstock pricing lower. 60/90 Days: (Same as last week) A downturn in PET pricing is becoming less likely. Instead of lower pricing by the end of the year, we are expecting stability at or near Summer 2016 prices. Either way, it is reasonable to assume PET prices will remain at or slightly below Summer prices, which is still low on the historical perspective.
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