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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 15/05/2017 (11:55)
PE Drivers

According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, every driver that supported the 2017 price increases withdrew in April; oil prices, inventories, exports, and production all reversed course in April.

Market Overview

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

Inventories gained over 360 million pounds, representing the highest level since last summer.
Export volumes were at the lowest level in more than 18 months and continue to be very slow.
Production returned to average levels, adding more than six days of inventory.

Dow’s new production is the first of 2017’s startups, with an expected completion by July. CP Chem has a Q3 expected start date.

Ethylene: The market continues to hold up a near $0.30/lb, with mostly heavy buying activity from very few suppliers. Traders are taking a short term bullish position (pending the on-time startups of the new PE capacity) that could shift to a bearish position toward the end of 2017 (pending on-time startups new ethylene capacity).

Naphtha: As expected, prices are retreating with the declining oil prices. Prices fell another $15/mt this past week to $450/mt.

PE Outlook and Suggested Action Strategies

Higher inventories and good production will apply significant downward price pressure. Buy as needed and aggressively in the secondary markets. Delay purchases as long as possible. 60/90 Days: It is reasonable to expect $0.03-0.05/lb price erosion in the next 60-90 days.

PP Drivers

PGP settles down $0.075/lb at $0.385/lb.

Market Overview

PGP settled early in May. Plus, it settled about where the spot numbers implied it should have settled.
Spot PGP has not moved much this past week. The market price for propylene is getting to where it would be expected to start to see some resistance. Further declines could be seen.

Contract polypropylene prices will also be down $0.075/lb in May, same as the PGP drop.

Spot polypropylene prices continue to discount to contract prices but the gap is shrinking.

ACC numbers posted this week showed steep rate cuts for PP with April production down by 8.2% from March.

This cut was needed to match demand levels which were the weakest of 2017. Overall demand is down 1.6% YTD.

PP inventories were down only 9 million/lb despite the cut in production. Days of Supply are 33.8 days.

Propylene

Spot PGP is valued at $0.3575/lb.

Spot RGP is valued at $0.23/lb.

FHR’s PDH unit is expected to return to operation the end of May.

EIA inventories built from 2.97 to 3.15 million/bbl.

PP Outlook and Suggested Action Strategies

30 Days: May PP prices are down $0.075/lb. Current spot opportunities are attractive and should be given consideration. Contract prices should also put buyers into a buying mode. 60/90 Days: June PGP and PP prices could see further declines, but any decrease will be much smaller than the previous two months. The next bottom should be seen to start to develop during this time.

PVC Drivers

Export volume falls 25% and domestic production is down 8% in preliminary April ACC numbers, leading to a modest inventory draw.

Market Overview

PVC supply had been constrained in Q1 by PVC maintenance, with Q2 restricted by chlor-alkali maintenance.

Calculated inventories remain higher than this time last year as producers are expected to pick up the pace to supply a good construction season in 2017.

Feedstock costs will not move lower in May as ethylene pricing has remained higher on unplanned outages.

Key to supporting a price reversal in the market will be increasing PVC production and inventory improvement as export pricing remains lower.

Supply & Demand

Supply: PVC operating rates fell below 75% from a combination of maintenance and producer discipline.
Demand: Global interest (& pricing) in US exports fell by 25% (ACC) as inventory from domestic pre-buy ahead of price increases slowed domestic demand by 3% (ACC).

Feedstocks

Chlorine: Spot prices are still at near historic highs due to a bullish supply/demand balance.

Ethylene: The market continues to hold up a near $0.30/lb, with mostly heavy buying activity from very few suppliers. Traders are taking a short term bullish position (pending the on-time startups of the new PE capacity) that could shift to a bearish position toward the end of 2017 (pending on-time startups new ethylene capacity).

PVC Outlook and Suggested Action Strategies

30 Days: Continue to buy as needed as prices are currently flat, but improved operations are expected to lower pricing down the road. Lower RMC and ultimately improving supplies will help the process of reversing the March increase. 60/90 Days: Supplies are set to improve by the turn of the quarter with additional ethylene capacity and stronger PVC operating rates, which will help to meet the incoming construction demand. Buy as needed.

PET Drivers

Decent supply availability joins with lower raw material costs to support lower May PET pricing.

Market Overview

While supplies are typically shorter this time of year due to the summer bottling season, ample pre-buying has smoothed the demand cycle and supplies are reportedly sufficient. Spot prices were already being seen $0.04/lb lower from last week.

Certain PET grades will see an increase due to shorter supplies for upstream purified isophthalic acid.
USITC March import data shows total PET imports increased by ~24.3 million pounds, mainly due to +8 million pounds from Asia (+14%) and +11.5 million pounds from Latin America (+12%).

WTI crude oil prices started the week around $46/bbl, but has since edged up towards $48/bbl. Refinery rates have eased off of their recent highs and are now sitting at 91.5%.

Feedstocks

Paraxylene (PX): Upstream

mixed xylene prices continue to edge lower, approaching the gasoline blending pool level. PX contracts for May are being heard at the $0.42/lb mark (unconfirmed), despite an April only showing initial settlements heard at $0.43/lb.

PTA: With May PX expected to be settled at $0.42/lb, the formula would put PTA at $0.4293/lb. Spot prices in Asia continue to be bearish due to lower upstream prices.

MEG: Most market fundamentals were unchanged from last week, as higher inventories in China supported a bearish outlook. Spot pricing was stable for the week.

PET Outlook and Suggested Action Strategies

30 Days: May is starting to show signs of a potential $0.01/lb or more decrease, unless you buy a grade of PET that is more dependent on purified isophthalic acid which would experience an increase of $0.01/lb. Regardless, there are a lot of price decrease drivers out there; push for as great of a price reduction as possible, quoting lower global PET prices, lower crude oil, falling feedstocks, strong supplies, and lackluster demand. 60/90 Days: The recent bearish nature of PET will not last long. Stock up at the current lower levels, while expecting increases heading into July/August.
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