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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 06/03/2017 (18:26)
According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, the February increase was implemented across the polyethylene market. Global prices have firmed or slightly retreated due to good inventories in every region.

Market Overview

The $0.06/lb March increase is pending. Several plastic publications have printed expectations of the increase being successfully implemented. Suppliers view this as support and will try to hold the increase as long as possible.

The current spread for commodity resins between North America and SEA is $0.07-0.10/lb. Lower global prices or higher domestic prices could weaken demand in North America.

Brokers and Traders have reported very poor demand in February.

Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen, told Reuters Global Oil Forum:

"I still see the risk of $50 a barrel before $60 on Brent, but have to acknowledge that we have so far
seen a very limited selling appetite."

Feedstocks

Spot Ethylene: The February contract settled $0.0225/lb higher, at $0.3575/lb. Spot ethylene market continued the same stagnant pace with very few participants. The price is remaining in the high $0.20’s due to the lack of trades. Buyers are very bearish in the spot market. Prices are expected to decline further as new capacity starts in April/May.

Naphtha: Prices remained near $510/mt. The cost to make a pellet is near $0.50/lb. Naphtha continues to mirror the oil price movement.

RTi PE Outlook and Suggested Action Strategies

30 Days: Resin strategies will be dependent on the supplier actions and market data for the first half of March. If this increase is implemented, buy as needed. If the increase is delayed, the second half of March data will determine end-of-the-month resin strategies. 60/90 Days: Global demand, oil, and the North American export market will determine the length of the February or March increase. The newly announced increase will extend the February increase through March and April. All the drivers listed must be strong, or the February price increase may not last past 90 days.

In the PP market, PGP rally has some life left!

Market Overview

PGP contract prices settled up by $0.065/lb to $0.48/lb for February.

March has started with spot PGP pushing higher. If we estimate the March PGP settlement based on today’s spot numbers, the potential is up another $0.06/lb to $0.07/lb. But, there is still several weeks before it has to settle, and a lot can still happen.

Refineries have started, and will continue, to come back on-line. Propane, butane, and light naphtha are all advantaged over ethane in the cracker. Formosa’s cracker has restarted and CPChem is restarting this weekend. There is also some sentiment that we could see metathesis production ramp up. Supply of propylene looks much better from here on out.

Combine this with demand destruction and the monomer market is poised for a correction.

We’re not out of the woods yet, but, like they say for March, “in like a lion, out like a lamb.” Will it apply for propylene?

In the meantime, reports from the market suggest PP demand remains soft heading into March.

Several PP increase letters also surfaced this week stating their intention to move PP prices with the movement in PGP contract prices.

Propylene

Spot PGP traded several times at $0.525/lb.

Spot RGP traded at $0.42/lb pipe and $0.43/lb rail.

EIA propylene inventories were down to 2.51 million/bbl.

Refinery rates jumped from 84.3% to 86.0% (US) and from 84.2% to 88.0% (PADD3).

RTi PP Outlook and Suggested Action Strategies

30 Days: March is too early to call. Current indicators point to an increase, but those could look different in a couple weeks. In either case, March will be a “peak” month. Buy only what you need. 60/90 Days: We expect a correction to be in process by this time. Price relief will arrive, and converters will be much better positioned for the summer seasons.

In the PVC market, ethylene spot continued lower down a total of $0.0975/lb over 3 weeks, which will lead to a contract decrease in March to more than offset the February ethylene increase. PVC price nominations will need support from outages and demand to offset lower costs in March.

Market Overview

Following the implementation of a $0.04/lb increase in February, due to higher costs and strong January pre-buying/restocking, we look to the $0.03/lb March nomination followed by a reinforcing $0.03/lb for April from some producers.

Export pricing continued to push higher on more limited availability, now above $0.41/lb, in part offsetting reduced coal-based production in China and steady demand in the Asian region.

Supply & Demand

Supply: Two scheduled maintenance events will take place later this month, with duration and impact expected to be relatively minor, but not helpful during the run-up to construction season.

Demand: Construction growth is expected with concerns expressed from various quarters regarding availability of land to build and labor.

Feedstocks

Chlorine: Bullish expectations and tightened supplies pushed spot chlorine prices $/st higher from last week.

Ethylene: The February contract settled $0.0225/lb higher, at $0.3575/lb. Spot ethylene market continued the same stagnant pace with very few participants. The price is remaining in the high $0.20’s due to the lack of trades. Buyers are very bearish in the spot market. Prices are expected to decline further as new capacity starts in April/May.

RTi PVC Outlook and Suggested Action Strategies

30 Days: Increasing export pricing and supply constraint in March will be offset at least in part by lower RMC allowing for reduction and potential push-out of the March increase nomination. The April nomination is designed to reinforce the March nomination and encourage pre-buying demand just in case. 60/90 Days: Increasing ethylene & PVC supplies, after maintenance is concluded, will lower price pressure on PVC as supply improves to meet demand for the construction season. Expect efforts to implement a portion of the March nomination in Q2 if demand (export/construction) outstrips supply recovery from outages.

Formula-based PET for February was up $0.015/lb, while market-based settled $0.01- 0.02/lb higher.

Market Overview

Domestic spot PET moved ~$0.01/lb lower from last week in response to lower Asian feedstocks and Asian PET resin prices. Forward outlooks are mixed; some are pointing to declining feedstock prices in Asia as signs of potentially lower PET, others are expecting seasonal demand to raise PET prices.
A February increase above the RMC has been heard in the market, which could be the result of a premature expectation by PET producers that the RMC will move higher in March.

After experiencing a few delays, the M&G Corpus Christi facility (estimated 2.4 billion pounds PET capacity) is now slated for completion by Q3/Q4 2017. Once operating, this facility would produce low cost domestic PET resin that could push out some import volumes from Asia and/or Latin America.
WTI crude oil barely edged $54/bbl before retreating to $53/bbl by weeks’ end. Refinery rates gained 1.7% from the previous week.

Feedstocks

Paraxylene (PX): Upstream mixed xylene blending values have been weakening for the past few weeks, creating downward pressure on pricing. Spot PX moved lower from last week due to declines in both domestic MX and PX in Asia.

PTA: The Asian contract price for PTA settled at $900/mt for February. A formerly idle PTA plant in China recently restarted, adding more PTA supplies into the market and pushed prices lower for the second half of February.

MEG: The sudden strength in trading activity that was present for nearly a month has slowed this week. MEG prices had slid nearly 10% since the start of the month due to these traders adding more MEG supplies into the market. Now the traders are holding back, either due to falling trader inventories, or as an attempt to prevent prices from falling further.

RTi PET Outlook and Suggested Action Strategies

30 Days: An increase of +$0.03/lb for February was heard; if received, try to resist it, quoting that raw material costs were up $0.015/lb and market pricing was only up $0.01-0.02/lb. March raw materials are estimated to be up another $0.01/lb. 60/90 Days: Forward price expectations are mixed. The Asian PET market still holds a lot of sway over domestic PET pricing, and current Asian feedstock prices are falling, but demand has yet to see its peak. Monitor the Asian PET market as well as the supply/demand balance for NA to help determine the forward PET price direction.
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