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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 30/05/2017 (15:45)
PE Drivers

According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, not every supplier recognizes the recent $0.03/lb decrease for every PE resin family. Several suppliers think that HDPE injection supplies are tight enough to retain the March $0.03/lb increase through May; this is atypical for the PE market.

Market Overview

Export prices declined from last week to the lowest levels of 2017. LLDPE and HDPE blow molding prices are down $0.04/lb to $0.43/lb railcar FOB Houston, TX.

Secondary market prices are in the lower $0.50’s/lb. HDPE injection is the highest priced off-grade resin, selling near $0.58/lb. Buyers continue to lead prices lower.

OPEC extended the six-month oil production cuts for another nine months. Several analysts do not believe this will be enough to drive prices above $55/bbl. Oil prices are near $50-51/bbl this week.

Without any formal announcement, the recent market price decrease activity has removed any chance of a price increase next month.

Ethylene: The market continues to hold up near $0.30/lb with mostly heavy buying activity from very few suppliers. New PE start-ups could keep prices at this level until ethylene production starts in the fall.

Naphtha: Prices remained near $460/ton as oil prices moved slightly higher. The cost to produce a pellet from naphtha is near $0.47/lb.

PE Outlook and Suggested Action Strategies

30 Days: Same actions as last week. Higher inventories and good production will apply significant downward price pressure in June. Buy as needed and aggressively in the secondary markets. When possible, delay purchases into the next month. 60/90 Days: It is reasonable to expect $0.03-0.05/lb price erosion in the next 60-90 days if oil remains near $50/bbl.

PP Drivers

Contract PGP settled early in May at $0.385/lb.

Market Overview

Spot PGP has inched higher than the last couple weeks with current values at $0.375/lb. This would leave the implied contract price for June at $0.395/lb to $0.40/lb, which would be up from May. Most of the current discussions on the June PGP settlement are calling for a flat settlement, however.

There are still several weeks before June contracts settle, and during that time, the FHR PDH unit is expected to restart. This could have a softening effect on spot PGP.

One market driver behind the recent trend is that 2-3 cargoes of propylene were booked for export to Europe, and additional cargoes are getting discussed.

Polypropylene contract prices have been moving in lockstep with PGP since the beginning of the year. This has taken PP prices down $0.135/lb over the past two months.

Demand for PP has picked up in May, but not to the level of maximizing assets. Producers are running to orders.

Propylene

Spot PGP is valued at $0.375/lb.

Spot RGP traded this morning at $0.2475/lb.

Spot PGP in Europe is €831/ton ($0.415/lb).

Propane and butane remain in the cracker feed slate.

EIA inventories had a small setback with levels dropping from 3.16 million/bbl to 3.10 million/bbl.

PP Outlook and Suggested Action Strategies

30 Days: May contract PP prices are down $0.075/lb. We are looking at June prices to come in flat or very close to flat. 60/90 Days: There remains potential for some additional downward movement in both PGP and PP prices, but the market is feeling close to bottom.

PVC Drivers

Improving ethylene supplies lowered spot pricing $0.02/lb this week as chlorine prices were static during a heavy maintenance phase.

Market Overview

Export pricing remained static in the face of flat pricing overseas, continuing to limit export growth at current price levels.

Domestic prices are expected flat in May with future progression dependent on global demand and improving supplies.

Ethylene is expected to see some downward pressure in June/July as ethylene operations improve.

Supply & Demand

Supply: Operating rates are expected higher in May/June, anticipating improving demand from construction.

Demand: Export demand/pricing is yet to benefit from some Asian shutdowns, with some seasonal weakness due to monsoon and holiday periods.

Feedstocks

Chlorine: Weak trading activity somewhat mitigated bullish fundamentals, keeping spot prices flat on the week.

Ethylene: The market continues to hold up near $0.30/lb, with mostly heavy buying activity from very few suppliers. New PE start-ups could keep prices at this level until ethylene production starts in the fall.

PVC Outlook and Suggested Action Strategies

30 Days: Continue to buy as needed while prices continue flat. Improved operations and lower cost ethylene are expected to pressure pricing lower in coming months depending on the evolution of demand in construction and export. 60/90 Days: Supplies will improve by the turn of the quarter with additional ethylene capacity and stronger PVC operating rates, which will help meet any growth in construction or export demand. Buy as needed.

PET Drivers

PET price pressure rises on the back of shortened supplies for co-monomers.

Market Overview

Rising prices for purified isophthalic acid (PIA) and diethylene glycol (DEG) and has prompted at least two producers to announce a $0.03/lb increase for June, with a few more pushing a $0.01/lb increase for May.

PIA and DEG are lesser known co-monomers used to enhance certain properties of PET. Co-monomer content in PET is usually around ~4% for bottle grade resin.

WTI crude oil prices finally broke the $50/bbl mark, peaking at nearly $52/bbl by mid-week. However, recent prices have since started dipping down towards $48/bbl. Refinery rates were mostly unchanged at 93.5%.

Feedstocks

Paraxylene (PX): Mixed xylene prices moved marginally higher this week in line with the change in gasoline prices. Spot PX in Asia continued to rise this week in response to higher upstream costs.

PTA: Supplies in Asia are still somewhat weak after experiencing some outages and reduced operating rates. Demand saw a notable uptick, which, when combined reduced supplies last week, created a short term bullish outlook on pricing.

MEG: Renewed buying interest and rising crude oil prices (for most of May) pushed MEG prices in both the US and Asia higher this week. The forward outlook is currently somewhat mixed due to changes in crude oil prices.

PET Outlook and Suggested Action Strategies

30 Days: The $0.01/lb increase is still on the table, and the more attention that the PIA/DEG supply situation gets, the stronger the $0.01/lb will stick. Although the price increase is reasonable, try to push back, stating that the rest of the market has ignored the PIA/DEG supply shortening for the past few months, so why start now. Otherwise, stock up now, because outlooks point to flat to higher pricing in June. 60/90 Days: We can easily expect PET pricing to climb for the next few months. Continue to buy earlier rather than later to avoid most of the increases.
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