Weekly Market Drivers for the USA
Off grade market prices for HDPE and LLDPE were offered below $0.50/lb. this week.
Several suppliers offered a $0.03/lb. price decrease for prime PE in November. October prices were unchanged from September. The September $0.05/lb. price increase was sustained.
Houston warehouse saw a surge in railcar deliveries for export.
Nova’s new HDPE capacity is scheduled to be online by year end or sooner.
Reuters reported, “Oil prices hit new five-week intraday lows ($44.37) on Thursday after U.S. crude stocks data compounded concerns over a global glut and as investors remained skeptical about OPEC’s planned production limit.”
Spot Ethylene: Traders are expecting a return to the $0.25/lb. range by year end. Q1 2107 turnaround season will be limited with additional capacity expected by April/May 2017.
Naphtha: Prices fell to $425/MT this week keeping pace will lower oil prices. Cost to produce ethylene to $0.31/lb. from naphtha. PE pellet cost to make is near $0.46/lb.
RTi PE Outlook and Suggested Action Strategies
30 Days: Continue the same strategy. Buy resin in November and December to meet demand. Secondary market buyers should aggressively pursue better pricing, 60/90 Days: Do not build year-end inventory. In addition to the November $0.03/lb. decrease, buyers should expect more in December and January. It is reasonable to expect as much as $0.04-$0.05/lb. additional decrease.
In the PP market, spot propylene unwinds at week’s end.
Polypropylene prices moved lower in October with the PGP move of down $0.015/lb. We are heading towards another downward move for November.
Current indicators point to another drop for November PGP contract prices. PP prices will again follow. In certain commodity markets, even lower prices are getting done. The lines are blurred between spot purchases and contract purchases.
What is clear is that demand is currently soft and excess material exists. There is an effort to clear these pounds by the end of the year. Whether it is spot or contract, the price points needed to secure orders are much lower than the “contract” price would suggest.
Speaking of contract pricing, 2017 deals are currently being negotiated. We expect to see some margin come out of the price once settled. This, along with lower PGP prices, will make it difficult for imports to compete.
Braskem has stated they are undertaking a feasibility study for a billion/LB/YR PP plant in LaPorte, TX. Monomer would be supplied by Enterprise and Unipol technology will be provided by W.R. Grace & Co. ETA is early 2019.
Spot PGP traded lower to $0.345/lb. It was re-offered at the same price which indicates its true value is even lower.
Spot RGP traded at $0.22/lb.
EIA inventories saw another strong build with levels reaching 3.71 million/bbl.
The implied contract price for November would be $0.37/lb, or down $0.045/lb. By settlement time, it could easily be lower.
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 continued to fall, increasing expectations for a bigger reduction in Nov ethylene contract along with an Oct. contract settling at the bottom of the range, down $0.0025/lb.
PVC increase nominations of $0.04/lb for October are expected to settle in the $0.005-0.015/lb range as export pricing moved higher by more than a penny and ethylene contract price relief was largely differed to November.
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 are improving rapidly in November.
Supply & Demand
Supply: Maintenance in Q4, including capacity expansion, is planned for in terms of inventory, but may see some offset in demand.
Demand: Unusual late season demand due to mild weather and stimulus spending in China driving export prices higher.
Chlorine: Spot prices saw a minor increase of $5/st this week, which is still $35/st below the summer peak.
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 St rategies
30 Days: PVC pricing nominations are being undercut by steeper drops in feedstock spot pricing and growing inventories. Ethylene contracts will see a much larger drop in November as PVC pricing is expected up $0.005-0.015/lb. 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.
In the PET market, no news of the Alpek/PQS negotiations, despite reaching the end of the 30-day extension period. Non-exclusive discussions are said to be taking place at this time.
Global PET pricing was mostly mixed this week, with domestic spot stable, Asian prices slightly down, and European pricing slightly up on the week.
Market participants are still awaiting the conclusion of the Alpek/PQS negotiations, which after completion, should spell the end of the Brazilian import price domination seen over the past two months.
WTI crude oil prices slipped ~$5/bbl by the end of the week, down to just above $45/bbl. Refinery rates remained constant at around the mid 80%’s mark.
Paraxylene: The November Asian Contract Price (ACP) for PX settled at $795/mt, up $15/mt from October, which could influence the US November PX settlement higher. Mixed xylenes continued to see some upward pressure throughout October, due to limited supplies.
PTA: Expectations for reduced supplies by year end has boosted Asian spot PTA prices for most of October. Higher spot prices in Asia as well as the higher PX ACP settlement could easily raise the US PTA spot and contract pricing for November.
MEG: The MEG forward outlook has mixed expectations due to slightly bullish fundamentals, stronger inventories in Asia, and crude oil prices touching close to $45/bbl this week.
RTi PET Outlook and Suggested Action Strategies
30 Days: There is little change expected for November as of yet. Crude oil prices heading towards $45/bbl may cause raw material costs to move lower. 60/90 Days: Current outlooks point toward price stability through the remainder of the year. The two major variables at play are the Alpek/PQS negotiations and the crude oil price moves. Keep an eye on both to help determine the domestic PET forward price direction.
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