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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 05/06/2017 (18:34)
PE Drivers

May polyethylene prices declined $0.03/lb, causing suppliers to offer discounts or concede to competitive offers.

Market Overview

April inventories improved 360 million pounds. The PE market should expect another build in May from the result of good production and weak exports.

Export prices declined in May to the lowest prices of 2017. HDPE blow molding prices are down $0.04/lb to $0.43/lb railcar FOB Houston, TX. LLDPE offers are at the same level without any buyers.

High inventories in China could restrain North American exports in June and July.
Without any formal announcement, the recent price decrease has removed any chance of a price increase suppliers delayed to June.

Without any formal announcement, the recent price decrease has removed any chance of a price increase suppliers delayed to June.

Feedstocks

Ethylene: The spot market fell almost 20% from the previous week to the mid $0.20’s. However, the price rebounded after the recent activity of one major buyer. Traders are beginning to be bearish regarding the strength of the spot market.

Naphtha: Prices finished the month at $460/mt, the same level as where they started in May after falling $30/mt by midmonth. Prices remained near $460/mt. 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. There nothing present that could drive an increase outside a major disruption.

PP Drivers

Market Overview

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

Spot PGP is steady this past week with current values at $0.37/lb. If June PGP contracts were to settle today, it is hard to see prices settling down. A flat settlement is the current consensus.

FHR was heard to be applying heat to their PDH unit, indicating a start-up is in process. A quick restart could lead to softer prices and influence the June settlement.

Three cargoes of propylene have been booked for export. We have not seen any subsequent bookings.

Polypropylene contract prices will move with PGP for June; expect steady prices.
PP producers continue to report strong orders for May and June.

Spot PP prices are up from recent weeks and availability is not as fluid.

Propylene

Spot PGP is valued at $0.37/lb.

Spot RGP is valued at $0.235/lb.

Contract PGP in Europe settled down €40/mt for June to €840/mt ($0.427/lb).

Lower oil prices are keeping propane and butane in the cracker feed slate.

EIA inventories were down with levels dropping from 3.10 million/bbl to 3.03 million/bbl.

PP Outlook and Suggested Action Strategies

30 Days: June prices look to be steady from May with a chance for a slight downward move. 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.

PS Drivers

PS buyers demand additional price concessions in June, but producers could prevail with flat to higher prices.

Market Overview

Based on the current feedstock prices, a rollover for June is highly probable (Styrolution is currently telling buyers their prices will be flat in June).

May prices have firmed. Not all buyers received the same price drop; therefore I am setting my June price reduction at $0.02-0.03/lb.

Unless you have a competitive price situation with Total, the other producers are not willing to offer more than minus $0.02/lb. Feedstocks

Benzene (BZ): BZ prices have been volatile lately, but the monthly average price is down ~5%. The forward bids/offers range is $2.52- 2.63/gal. The June contract price firmed at $2.71/gal Exxon and $2.70/gal P66.

Styrene Monomer (SM): The weekly average price is flat, but the monthly average price is down ~12%. Planned TAR’s in Asia is expected to tighten their supply position and send prices upward, thereby pulling NA prices up too. NA SM is currently the lowest priced region. Good supply and a lack of exports could potentially send prices even lower, prompting NA producers to consider reducing operating rates.

Butadiene (BD): The price plunge in Asia is a major reason the NA price is falling, coupled with a well-supplied NA market. June contract prices firmed down $0.04/lb to $0.60/lb.

PS Outlook and Suggested Action Strategies

30 Days: Buy as needed. As long as feedstocks are relatively stable, PS prices should not move higher. 60/90 Days: PS demand could see a drop off in NA, which in turn could keep prices flat to possibly down. Continue to buy JIT.

PVC Drivers

Ethylene spot averaged flat in May as June as supplies are improving along with demand. Chlorine is nominated higher due to maintenance and strong demand.

Market Overview

RMC for PVC are expected up $0.005/lb in June versus April.

Export pricing moved higher as Q3 export pricing prospects improved and some PVC operating rate constraint is expected from upstream maintenance.

Domestic prices are expected flat in June as the supply/demand balance remains on the tighter side and RMC are modestly higher.

Ethylene downward pressure in June/July may see some offset from greater PE demand.

Supply & Demand

Supply: Operating rates are expected to continue to improve in May/June, but that improvement will be tempered by upstream maintenance.

Demand: Export demand/pricing is showing some potential strength for Q3 as domestic demand is expected to pick up as a wet spring ends and the construction season gets into full swing.

Feedstocks

Chlorine: Increased seasonal demand pushed spot prices another $5/st higher this week.

Ethylene: The spot market fell almost 20% from the previous week to the mid $0.20’s. However, the price rebounded after the recent activity of one major buyer. Traders are beginning to be bearish regarding the strength of the spot market.

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, but more slowly than expected with the added complication of improving export interest. 60/90 Days: Supplies will improve in Q3 with additional ethylene capacity and stronger PVC operating rates, which will help to meet any growth in construction or export demand. Buy as needed.

PET Drivers

At least two producers announced a $0.03/lb increase for June PET.

Market Overview

May PET was mixed, with some producers pushing increases (~$0.01/lb) due to higher cost comonomers PIA/DEG. The rest of the market responded to lower feedstock prices with a decrease of ~$0.01/lb.

Due to the sporadic PIA/DEG related increases, some competitive situations have opened up, allowing for some producers to undercut those who are sending out increases.

Spot PET prices have been flat for most of May. Current spot indications are ~$0.02/lb above the 2016 low.

WTI crude oil prices have been staying between $49/bbl and $48/bbl this week. Refinery rates moved to 95%, which is a 21-month high.

Feedstocks

Paraxylene (PX): Gasoline prices are experiencing upward pressure from the summer driving seasonal demand, narrowing the gap between gas prices and mixed xylenes. If gas prices raise high enough, mixed xylenes will be blended into the gasoline pool, which will reduce supply availability for downstream PX/PTA.

PTA: PX/PTA prices in Asia saw a minor dip this week due to some short term bearish outlooks, but expectations going forward are for steadily rising prices from upstream price pressure.

MEG: Recent prices have been moving in accordance with the changes in crude oil prices. Market fundamentals have been mixed, reinforcing the impact that crude oil has made on the MEG price direction.

PET Outlook and Suggested Action Strategies

30 Days: If you received a PIA/DEG related price increase for May, keep an ear out for competitive offers, but also be wary of the potential for these competitors to raise their prices after the first few months. The $0.03/lb increase nominations for June that is currently on the table is a bit above the current raw material cost outlook. Either way, expect an increase for June, and prepare by buying earlier rather than later. 60/90 Days: We are still expecting PET pricing to climb for the next few months. Buy sooner to delay the impact of the impending increases.
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