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.
The export price delta is still above of the $0.10/lb. max, indicating more domestic price reductions.
Spot ethylene traded below $0.24/lb. this week, the lowest price in eight months.
Spot Ethylene: Spot ethylene is settling well below near $0.25/lb. Production rates are healthy and availability is exceeding demand. Q1 2017 turnaround season will be limited with additional capacity expected by April/May 2017.
Naphtha: Prices remain near $425/MT this week keeping pace with steady oil prices. Cost to produce ethylene is $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 a $0.04-$0.05/lb. additional decrease.
In the PP market, November PGP settles down $0.06/lb to $0.355/lb.
November polypropylene prices will move lower by at least $0.06/lb with the PGP move. Further price concessions are also being seen for contract pounds as weak demand and high inventories weigh on industry margins.
Based on spot propylene, it would appear likely that we see further downward movement for December PGP contract prices, and likewise, December polypropylene prices
October ACC data showed that both demand and production were significantly down. Demand was hit the hardest with October preliminary results showing 9.7% below the 2016 average.
October production was down 5.7% from the 2016 average. Inventories built by 67 million/lb and currently sit at yearly highs.
Soft demand and high inventory levels have created very motivated sellers. Spot prices remain well below contract prices, and prices continue to fall.
Spot PGP traded lower to $0.305/lb.
Spot PGP being offered again at $0.305/lb but could break $0.30/lb before long.
Spot PGP has shed roughly $0.08/lb since the beginning of October.
Spot RGP is being offered at $0.185/lb.
After building 1.51 million/bbl over 10 weeks, EIA propylene inventories fell from 3.71 million/bbl to 3.66 million/bbl.
We believe this to be a blip. Almost all propylene supply streams are running hard.
RTi PP Outlook and Suggested Action Strategies
30 Days: Polypropylene prices take a significant step lower in November. Good buying opportunities exist for anyone capable of taking advantage of year-end deals. 60/90 Days: Current indicators suggest 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, as ethane and ethylene spot continued to fall, domestic demand moved up 3% ahead of implementation of the Oct increase reducing inventories 9% (ACC).
PVC increase nominations of $0.04/lb for October are settling in closer to $0.02/lb than $0.01/lb as export prices moved above $0.37/lb and domestic demand moved up ahead of the increase (and unseasonably mild weather).
Chlorine has moved higher on strong chlorine and caustic demand as ethylene is expected to more than offset to the downside as PVC raw material costs peaked in Sept followed by reductions of $0.02-0.03/lb in Q4.
Supply & Demand
Supply: Maintenance is underway for a capacity expansion as the market is balanced despite lower inventories.
Demand: Unusual late season demand due to mild weather and in advance of the price increase implementation.
Chlorine: Outages in Texas and British Columbia has reduced chlorine supply availability, which boosted prices this week.
Ethylene: Spot ethylene is settling well below near $.25/lb. Production rates are healthy and availability is exceeding demand. 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 will be flat to down through year end as negotiations for next year progress. Downside movement from ethylene reductions we see some headwind from higher export prices and a more balanced market from outages. 60/90 Days: Raw material costs will fall by $0.02-0.03/lb in Q4, allowing for removal of any enforced increases and also some potential decreases. Ethylene supplies will remain improved.
In the PET market, Q4 raw material costs projected to be upwards of $0.01/lb higher by years’ end.
Domestic spot PET was unchanged on the week, in line with stable markets in Asia amidst a slower demand season. Raw material cost outlooks show a potential increase upwards of $0.005/lb for November if current trends hold true.
After the 90-day negotiation period and a 30-day extension, the Alpek/PQS negotiations have had no sign of a resolution, yet there is no indication that this won’t happen.
WTI crude oil prices have been hovering around the $44-$45/bbl range for most of the week. Refinery rates saw a slight uptick of 2%, now around the mid to upper 80%’s.
Paraxylene: Mixed xylenes prices have since come off a mid-October high and are now resting at August/September levels. Spot PX in Asia started to move lower in response to Brent crude oil hanging around the $46/bbl mark.
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: Current supply issues as well as expectations for future supply concerns has been lifting the MEG markets in Asia, despite reasonably stable to lower ethylene prices and Brent crude around $46/bbl. The price increases in Asia and have been putting upward pressure on US spot and contract MEG pricing.
RTi PET Outlook and Suggested Action Strategies
30 Days: Minor raw material cost increases for November from both MEG and PX/PTA could easily raise November PET pricing by as much as $0.005/lb. WTI crude oil prices in the $44/bbl range may help lower this expectation if prices stay stable. 60/90 Days: Supply situations are likely to worsen for MEG through the end of the year. This will put upward pressure on both Asian and domestic PET pricing. Continue to monitor crude oil prices and the supply/demand balance in Asia for MEG and PET to help determine the forward PET price direction.
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