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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 03/04/2017 (18:08)
According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, the March PE price increase was split by multiple suppliers in letters stating the following: “$0.03/lb effective March 1 and $0.03/lb effective April 1.” The potential of this additional increase is dependent on the velocity of the inventory recovery.

Market Overview

Following the March $0.03/lb increase, April has a $0.03/lb price increase pending.

Houston warehouses have concluded the record export pace of the last four months. Warehouse rail sidings have very few cars waiting for packing and exporting. RTi sources close to the packing warehouse businesses are not expecting the export market to return to average levels until June or July.

Secondary market prices settled in March after the February and early March increases. This secondary market and the export market activity will be the first indicator of any price erosion in the next 60 days.

Feedstocks

Spot Ethylene: Prices are expected to decline in April and May as the new capacity from Oxy Chem commences. Cost to make ethylene is near $0.11/lb.

Naphtha: Prices stayed near $450/mt after falling more than $60/mt since February. The cost to make a pellet is now in the mid-$0.40’s/lb. Naphtha continues to mirror the oil price movement.


PE Outlook and Suggested Action Strategies

30 Days: With or without the implementation of an April potential $0.03/lb increase, buyers should buy only as needed. Without further increases, buying should return to normal patterns and allow inventories to slowly recover. 60/90 Days: Global demand, oil, and the North American export market will determine the length of the February and March increases. The March increase will extend the February increase a few more months than had been expected. Secondary market availability will be the first indicator of any potential change in prices.

In the PP market, spot PGP trades at $0.48/lb.

Market Overview

All indicators point to March being the peak month after PGP and PP prices settled higher by $0.04/lb.
Spot PGP has started to move lower. At current spot prices, the implied April PGP contract is $0.50/lb
to $0.505/lb.
It is still very early to be talking April settlements, and there is plenty of time for spot PGP to do some more work.
Many of the current speculations call for PGP to ultimately settle down by $0.04-0.06/lb.
There have been some well-priced spot polypropylene offers seen in the market, but they appear to be isolated to certain grades and suppliers.
Spot PP is tracking with the lower spot PGP prices.
We are also hearing that PP producer orders for April are looking strong as buyers return to the market.

Propylene

Spot PGP is valued at $0.48/lb.

Spot RGP is valued at $0.335/lb.

EIA propylene inventories were up to 2.51 million barrels; another small build.

Refinery OP rates continue to climb with recent reports showing 89.3% (US) and 91.9% (PADD3).

RTi PP Outlook and Suggested Action Strategies

30 Days: April contract prices are heading lower. The first couple of weeks of April will tell us how big of a decrease the market can expect based on PGP movement. 60/90 Days: We expect to see significant price decreases throughout the 2nd QTR. Enterprise is expected to start their PDH unit in July which should help keep PGP prices in check.

A significant reduction in March ethylene contract is expected as export pricing falls, removing the April PVC increase from contention and discounting the March nomination.

Market Overview

Global demand is easing, dropping export pricing below $0.40/lb.

Domestically the March increase appears to be coalescing around $0.02/lb, as maintenance is underway at a Texas plant.

With an April increase out of the picture and pending an on-time restart to the current outage, we can look for price decrease opportunities in Q2, with discussions staring as early as April.

Demand entering the construction season will play a role; if strong, we may see March prices extended for a month before lower pricing can be obtained.

Supply & Demand

Supply: Planned maintenance is underway at one of the major producer’s Texas plant for the next week.

Demand: Weather challenges in March are likely to impact housing numbers when released, but are likely to catch up with expectations in April as the construction season will be in full swing.

Feedstocks

Chlorine: Chlorine spot prices remained at $265/st this week after absorbing increases since the start of the year due to tightened supplies.

Ethylene: Prices are expected to decline in April and May as the new capacity from Oxy Chem commences. Cost to make ethylene is near $0.11/lb.

RTi PVC Outlook and Suggested Action Strategies

30 Days: The March increase will likely come in at $0.02/lb, but come under immediate pressure leading to decreases no later than May. Active discussions about lower RMC with your supplier will help move this process along. Buy as needed as you look for lower prices in Q2 from improved operations along the entire supply chain. 60/90 Days: Added ethylene capacity & full PVC operations will pressure PVC prices lower as supply improves to meet demand for the construction season.

PET formula and market prices are down by roughly $0.005/lb for March. Lower RMC moved pricing lower despite increase pressure from stronger seasonal demand.

Market Overview

Although PX/PTA contracts still haven’t fully settled yet, the initial settlements put the March PET formula price about $0.005/lb lower. Trading activity was quiet this week as participants expect lower April pricing, keeping recent spot assessments flat.

Bottle demand growth has been pegged at the 2-3% range, with the polyester carpet sector showing a large ~8% gain since the start of the year. Supplies are deemed sufficient, with operating rates set to climb to just under 90% over the next couple of months.

WTI crude oil prices have just edged over the $50/bbl mark by the end of the week. Refinery rates moved 2% higher, now at 89.3%.

Feedstocks

Paraxylene (PX): Upstream mixed xylene (MX) prices are still near the gasoline blending values, but are expected to rise in the next couple of months as we approach the summer driving season. Lower crude oil and MX have been putting downward pressure on spot PX pricing.

PTA: The same drivers affecting PX prices are trickling down to PTA, pushing spot prices lower and creating expectations for nearly flat contract pricing. If PX settles at its initial $0.45/lb, the PTA formula price would be at about $0.4528/lb.

MEG: Global market outlooks have united in a bearish outlook, with US MEG contracts expected to fall about $0.05/lb over the next couple of months. Weak demand, strong supplies, and cheaper upstream costs continue to support lower prices.

RTi PET Outlook and Suggested Action Strategies

30 Days: April is leaning toward a decrease of $0.01/lb at this time. The same factors contributing to lower feedstocks in March should continue to push feedstock prices lower in April. Crude oil has just breached the $50/bbl mark, which could influence the market outlook on feeds if it trends higher. 60/90 Days: The “plus or minus 1 cent” outlook is still valid. Currently, the market anticipates upward movement by as much as $0.01/lb higher by May due to recovery in feedstocks, particularly from PX as the summer driving season starts to push upstream costs higher. Monitor the crude oil and feedstock prices to help determine the forward PET price direction.
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