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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 19/12/2016 (17:37)
According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, OPEC and Non-OPEC countries seemingly agree to a cut in oil production which has contributed to an increase in the price of oil into the low to mid-$50’s. If sustained, this higher price will put price pressure on the global PE markets.

Market Overview

Jason Bordoff, the founding director of Columbia University’s Center on Global Energy Policy says. “The uncertainty about US shale is a huge game changer for OPEC,” “If prices rise to $60 and a large volume of oil can come back quickly, that’s a very significant constraint on the ability of OPEC to manage the oil market that we haven’t seen before.”

Any December market price concession has not been confirmed.

Houston warehouses are denying deliveries until January due to the record amount of exports arriving.
The early December exports may have tempered the chance of market price relief in December or January. This ongoing event may have established the December price as the short-term floor.

Oil prices are again the main driver for PE prices.

Feedstocks

Spot Ethylene: Spot ethylene stayed above $0.25/lb. this week. Production rates are healthy and availability is exceeding demand. Q1 2017 turnaround season will be limited with additional capacity expected by April/May 2017. Cost to produce ethylene from ethane is $0.11/lb.

Naphtha: Prices surged $25/MT with oil price increases to $475/MT. The cost to make a pellet increased $0.02-$0.03/lb. to near $0.50/lb.

RTi PE Outlook and Suggested Action Strategies

30 Days: Continue the same strategy. Buy resin in December to meet demand. Secondary market buyers should aggressively pursue better pricing sooner than later as the year ends. 60/90 Days: Depending on the inventory draw in December and the price of oil on January 1st, it is reasonable to expect some suppliers to announce a price increase attempt for February, a move to steady the market.

In the PP market, December PGP contract prices are close to a settlement!

Market Overview

The December PGP contract price negotiation is heating up. Down $0.035/lb is getting talked, but it does not have full consensus at the time of this writing. Wherever it ends up, polypropylene prices will drop by the same amount.

Following a November polypropylene production rate of 81.3%, exports of 120 million pounds, and an inventory draw of 153 million pounds, the domestic polypropylene market is better balanced.

Availability of secondary market material is noticeably tighter, although we have seen railcars of certain grades getting transacted. We have also seen some export deals get concluded for December as well.
Spot market prices have moved higher by at least a couple cents, more depending on the grade.

We expect polypropylene margins to remain steady in the near term. Margins have come down enough to keep imports out of the market.

Propylene

Spot PGP is up slightly on light activity. Spot PGP was seen being bid at $0.305/lb.

Spot RGP is up again this week to $0.17125/lb.

December contracts are close to settling. Expectations are for the December contract to be $0.32/lb to $0.325/lb.

EIA propylene inventories continue to climb hitting another yearly high of 4.652 million/bbl.

Although inventories are climbing, lower prices are starting threaten certain tiers of supply.

Steam cracker feeds are moving towards ethane. We are also hearing that refinery produced propylene is staying in the propane stream at some locations.

RTi PP Outlook and Suggested Action Strategies

30 Days: Polypropylene contract prices will move lower in December with PGP. Spot markets are shifting. Fewer opportunities remain available and spot prices are up. 60/90 Days: We see some potential for PGP prices to take another step lower, but the bottom is near and possibly already here for both propylene and polypropylene.

PVC is under some downward pressure in global markets as ethylene contract for Nov settled down $0.0525/lb (Correction from last week), with some pull-back in spot ethylene pricing over the past week on news of re-starts, tempered by fresh outages.

Market Overview

PVC pricing is under downward pressure in December as export pricing is starting to relax due to seasonal softening of demand, reduced pricing in Asia and the strong US$.

November raw material costs are down $0.02/lb., down to July levels. December raws are expected up fractionally from higher ethane due to higher natural gas pricing. Further improvements in ethylene supply will help reduce volatility in 2017.

Export pricing edged lower toward $0.37/lb as Asian nominations were reduced and demand softened.

Supply & Demand

Supply: Production fell 6% in Nov (ACC) as demand fell 9%, leading to a fractional inventory build. We are expecting at least one planned turnaround in the first half of Q1.

Demand: Demand fell 6% for exports (ACC) and 11% for domestic demand as seasonal demand reductions took hold and buyers looked for lower pricing in Nov and Dec after the October $0.02/lb increase.

Feedstocks

Chlorine: Supply disruptions seen in early November have supported higher spot pricing for chlorine for December.

Ethylene: Spot ethylene stayed above $0.25/lb. this week. Production rates are healthy and availability is exceeding demand. Q1 2017 turnaround season will be limited with additional capacity expected by April/May 2017. Cost to produce ethylene from ethane is $0.11/lb.

RTi PVC Outlook and Suggested Action Strategies

30 Days: A largely balanced market with lower feedstock costs will contribute to offsetting the October increase and more as contracts for next year are negotiated. 60/90 Days: Increasing ethylene supplies and downward export price pressure early next year will keep costs lower as the domestic PVC market is balanced by seasonal reductions in demand and planned maintenance.

Rising feedstocks and bullish market fundamentals in Asia pressure spot PET pricing higher.

Market Overview

Recent price increases for PET feedstocks (most notably MEG) have put current PET spot assessments at 7% above the mid-September low. Spot prices have been experiencing upward pressure since mid-November.

DAK Americas experienced an accident in their South Carolina PET facility that killed one and injured two employees. Production was said to be mostly unaffected.

WTI crude oil prices peaked at around $53/bbl by mid-week, but has since come down towards ~$50/bbl. Refinery rates were mostly unchanged (~90%) from the previous week.

Feedstocks

Paraxylene: Higher alternate prices for gasoline have been pressuring mixed xylene prices to rise, thus resulting in a November contract settlement for PX to increase $0.005/lb from October, at $0.405/lb.

PTA: The formula contract price for PTA (based of the PX settlement) is at $0.4183/lb. Demand has been decent with supplies leaning towards tight. Spot PTA prices in Asia responded to these market fundamentals with steady increases from late November.

MEG: MEG inventory levels in China have been slipping, indicating a tighter supply situation. Rising crude oil and ethylene prices, as well as the tightened supplies contributed to higher MEG spot pricing.


RTi PET Outlook and Suggested Action Strategies


30 Days: The recent crude oil retreat from $53/bbl could drive feedstock prices lower from the raw material cost perspective, but the supply/demand unbalance is the main factor driving MEG prices higher. December is still set for a PET price increase in response to the net increases in raw material costs. 60/90 Days: Feedstock prices are expected to slow down heading into Q1 2017. PET demand, on the other hand, is likely to see an uptick as the typical pre-buying season ahead of the summer demand season starts to gain traction. Keep a closer eye on the MEG supply situation and the change in crude oil prices; if MEG supplies improve and crude oil stays at or below $50/bbl, we could see some reversal of the PET price increase expectations for the start of 2017.
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