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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 08/05/2017 (13:44)
PE Drivers

According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, April’s PE price remained unchanged from March as major resin suppliers delayed the April increase to May. 2017 prices increased by $0.08/lb due to limited supply.

Market Overview

Following the April $0.03/lb increase, May has a $0.03/lb price increase pending.
Lower inventories were the driver for North American price increases. Continued improvements in inventory will be the primary challenge to this increase attempt. Some off-grade prices moved down right before May.

Inventories realized modest gains in March. Supply in April improved from March for some resins. The April inventory report will be a good indicator of the speed of the recovery.

Exports activity increased as offers were reduced at the end of April and beginning of May. Export prices were near $0.54/lb bag FOB Houston.

Spot Ethylene: Traders reported that Dow’s buying activity was the support for the steady price of ethylene. Traders speculate Dow is building ahead of the new PE capacity expected to start by July.
Naphtha: Prices retreated with declining oil prices. Prices fell about $20/ton to $480/ton.

PE Outlook and Suggested Action Strategies

30 Days: Prices in the secondary market will be the leading driver to monitor through May. Weaker prices will help determine the strength of the recent increase. Without further increases, buying should return to normal patterns and allow inventories to slowly recover. 60/90 Days: A weakness in pricing due to improved availability is expected. Secondary market and export availability will be the first indicator of any potential change in prices.

PP Drivers

In the PP market, spot PGP settles down $0.06/lb for April.

Market Overview

Spot PGP prices indicated that contract prices could have settled down $0.10/lb or $0.11/lb, but buyers and sellers agreed to only $0.06/lb.

This was not uncommon in a month where the price move was going to be large. It also sets the stage for May where another $0.06/lb downward move is already in play.

Propylene monomer supply continues to improve. Refinery rates reached 94.1% (US) and 94.6% (PADD3). ▪ EIA propylene inventories had a couple strong builds in the last weeks of April with levels reaching 2.68 million barrels.

Supply from steam crackers was also expected to be good. However, it was not clear that heavier feeds will be able to hold onto their cost advantage.

Downstream of monomer, demand for polypropylene was weak. April sales are expected to be below average as converters delay purchases.

Propylene

Spot PGP was valued at $0.3775/lb.

Spot RGP was valued between $0.26-0.27/lb. RGP supplies were deemed plentiful.

FHR’s PDH remains down for planned maintenance.

Reports indicate Enterprise will have to delay their PDH start date to October.

PP Outlook and Suggested Action Strategies

30 Days: April PP prices will move lower by $0.06/lb. Further decreases are imminent for May. Buy as needed. 60/90 Days: PGP and PP prices will be looking for the next bottom. Many factors will be coming into play as prices come down. Players are suspicious about how much demand the US market can find and how much monomer supply gets curtailed if prices get too low?

PVC Drivers

Export pricing was seen at the $0.38/lb level, which is down about $0.04/lb month-over month as export demand remains lackluster.

Market Overview

Q2 market drivers favor a decrease, with strong supply availability being able to cover an expected uptick in demand and ethylene prices starting to move lower with improved capacity.

Key to supporting a price reversal in the market will be stronger industry production and inventory fundamentals for April/May, overshadowing both domestic and export demand.

Supply & Demand

Supply: Formosa declared a force majeure at their Point Comfort, Texas facility for caustic soda and chlorine derived products, although there is expected to be little impact on overall market supply availability for PVC. Operating rates are anticipated to be around 90% for Q2.

Demand: Weather challenges slowed demand earlier this month, but they are currently set to grow for the summer construction season. Export demand rose 4% and domestic demand was up 2% (ACC), outpacing production for a 10% inventory draw.

Feedstocks

Chlorine: Supplies were still tight due to the Formosa force majeure, causing spot prices to climb $5/st higher.

Ethylene: Traders reported that Dow’s buying activity was the support for the steady price of ethylene. Traders speculated Dow was building ahead of the new PE capacity expected to start by July.

PVC Outlook and Suggested Action Strategies

30 Days: Continue to buy as needed as you look for lower prices from improved operations along the entire supply chain. Lower RMC and improving supplies will help move the process of reversing the March increase in Q2. 60/90 Days: Supplies are set to improve due to additional ethylene capacity and strong operating rates, which will help to meet the incoming construction seasonal demand.

PET Drivers

Formula based pricing for March and April were still dependent on absent March PX/PTA settlements as of late April.

Market Overview

Based on the current expectations for feedstock contracts, March was down $0.01/lb, and April was down $0.02-0.03/lb. Domestic spot pricing moved nearly $0.02/lb lower from last week due to lower feeds and bearish PET pricing in Asia.

There was a subtle demand shift for bottle grade PET resin, away from recycled flake to more virgin PET due to lightweighting (lowering recycle volumes) and reduced quality (from clamshells entering in the recycle pool).

WTI crude oil prices stayed below $50/bbl. Refinery rates moved ~1% higher, up to 94.1%.

Feedstocks

Paraxylene (PX): Crude oil prices retreating lower from the $50/bbl mark pushed gasoline prices lower.
Lower gasoline pulled the alternate values for MX lower, which put downward pressure on downstream PX.

PTA: Declining energy prices, coupled with an oversupply situation, pulled spot PTA prices in China lower.

MEG: Improving inventories and a bearish outlook continued to keep MEG prices low as of late April. While PX/PTA are anticipated to make marginal gains over the next few months, MEG is anticipated to move even lower, enough so to pull formula RMC down nearly $0.03/lb from March to May.

PET Outlook and Suggested Action Strategies

30 Days: Feedstock pricing is anticipated to diverge, heading into the next few months with PX/PTA tracking higher and MEG trending lower. This split is lending to potentially flat May PET pricing. Buy as needed or potentially stock up at April/May pricing levels. 60/90 Days: The MEG downturn is not likely to last past May, and PX/PTA should continue their seasonal upswing. Increase pressure on downstream PET should ramp up in the June/July timeframe. Initial estimates only show a $0.005-0.01/lb gain from the raw material front. Monitor feedstock prices, crude oil, and the Asian PET market to help determine whether the initial estimate is valid.
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