Weekly Market Drivers for the USA
by ChemOrbis Editorial Team - content@chemorbis.com
PE Drivers
As of today, it is still not completely clear which of the suppliers are delaying the July increase to August. Many of the suppliers continue to pursue the $0.03/lb increase.
Market Overview
There may be a successful attempt to split the HDPE and LL/LDPE price movement, which should be complete by late next week.
Dow sent a letter this week to reaffirm their intent to implement the previously-announced $0.03/lb increase for HDPE effective July 1, 2017. Dow also announced they are delaying the effective date of its previously announced $0.03/lb price increase from July 1st, 2017, to August 1st, 2017, for LLDPE and LDPE.
Nova and Westlake announced a new $0.03/lb price increase effective August 1st on all polyethylene grades. All of Westlake’s previously announced and unimplemented increases have been rescinded.
Formosa Plastics Corporation, Texas has resumed production of all its polyethylene units. The force majeure will remain in effect with sales control or allocation, depending on the various products through the end of July.
HDPE injection molding remains very tight.
Nova’s September/October turnaround will limit incremental pounds for off grade and export.
July exports realized a short-lived increase in LDPE exports this week.
Secondary market activity remains slow. Most resin prices are at June levels
Feedstocks
Ethylene: Spot prices are at the lowest level since February 2016. There is almost no buying interest in the spot market.
Naphtha: Prices are back near $405/mt after losing $20/mt this week. The cost to produce the naphtha pellet is near $0.44/lb.
PE Outlook and Suggested Action Strategies
30 Days: If the LLDPE and LDPE price increase is not implemented in July, the price increase discussion will continue into August. Without any strong market-wide drivers, the chance of the increase remains minimal and prices should remain flat. HDPE injection resin buyers should cover needs early and continue to communicate requirements to suppliers. 60/90 Days: If inventories continue to recover it is reasonable to expect $0.03/lb price erosion in the next 60-90 days if oil remains near or below $45/bbl. There is nothing present that could drive an increase outside a major disruption. Oil prices, soft global demand, and over-supply will be the key drivers for the second half of 2017.
PP Drivers
Two producers pile onto the August increase.
Market Overview
P66 and Ineos both issued letters this week calling for an August increase of $0.03/lb regardless of the monomer move.
Braskem, LBI, and Total previously announced margin expansion attempts for August ranging from $0.03/lb to $0.05/lb. Support from Formosa and Exxon is still absent.
We are getting mixed signals from producers on how they are approaching this increase. Some appear to be committed to going up three. Others are taking a ‘wait and see” approach. Others have indicated a willingness to back off on the amount.
Without Formosa and Exxon, it will be difficult to get market wide movement.
It is also clear that demand is off in July. We are seeing cars show up in the secondary markets and price offers have come down.
This follows one of the strongest demand months on record and a 125 million/lb inventory draw.
One thing is clear, buyers are not desperate for material. They appear to be covered. This is not usually the type of environment that supports margin expansion.
Propylene
Spot PGP last traded at $0.3625/lb.
Dow and FHR PDH units are running but have yet to hit rates.
Ethane is advantaged and could move heavies out of the feed slate.
PP Outlook and Suggested Action Strategies
30 Days: The implied August PGP contract is currently showing a rollover. What happens to PP prices is still TBD. Prepare your arguments and fight the increase. 60/90 Days: There is potential for lower prices for both PGP and PP but we are close to the bottom and do not expect any major downward price moves.
PS Drivers
“Too good to last!” That is the consensus about last month’s PS decrease, which has promptly been followed by a $0.02/lb increase for August.
Market Overview
The proposed increase has the market perplexed as to the validity of such an increase. At the time of this publication, only one producer has proposed the increase. Lacking support from the other producers will make implementation difficult.
Even with the $0.05/lb (GPPS) decrease in July, PS producers still have a margin gain of $0.02/lb year-to date.
Producers believe that the strength of the busy season was delayed due to PS increases in Q1 therefore; demand in July/August will be much stronger.
Feedstocks
Benzene (BZ): Spot prices are actively moving with energy costs; albeit at a slow pace. Supply is balanced due to favorable production runs and yields. Imports remain scarce, with only a few small loads reportedly headed to the USGC. The forward bids/offers range is $2.42-2.55/gal.
Styrene Monomer (SM): Spot prices topped the $0.51/lb mark for the first time since March. However, prices are already being pressured lower due to the price erosion in both Asia and Europe. Europe prices are nearly on par with NA, virtually closing the export arbitrage. LBI is reported to be buying BZ, signifying their POSM unit may be restarting.
Butadiene (BD): The BD spot prices have not found their bottom. Supplies are ample and production vibrant. Exxon has nominated August CP’s at $0.37/lb.
PS Outlook and Suggested Action Strategies
30 Days: The August increase is weak, but you will still need to discuss it with your suppliers. 60/90 Days: Demand has been improving, which could provide some leverage for the producers. Consider buying slightly more than needed during August.
PVC Drivers
Spot ethylene pricing rebounded $0.02/lb over the past week due to re-starts as the PVC supply/demand balance will determine the impact on PVC pricing in August.
Market Overview
June demand grew 5% from increases in both domestic and export demand as production fell 2% (ACC).
Overseas markets saw some slackening of recent price increase pressure as demand eased and export prices were largely flat below $0.38/lb.
The translation of the recent downturn in feedstock costs to PVC price will be challenged by strong domestic demand supported by strong housing numbers in June and recovering upstream production in chlor-alkali.
RMC for PVC moved lower by just over $0.01/lb in June as a drop of $0.005-0.01/lb is expected in July due to lower priced ethylene and modest increases in chlorine.
Supply & Demand
Supply: Upstream chlor-alkali output is recovering in the middle of a strong demand season. Calculated inventories fell by 12% in the final June numbers (ACC), but are 28% ahead of last year.
Demand: Construction demand is strong with rising housing starts and building permits, both above the 1.2 million pace in June.
Feedstocks
Chlorine: Market fundamentals are still tight, with shorter supplies and strong seasonal demand keeping spot prices high.
Ethylene: Spot prices are at the lowest level since February 2016. There is almost no buying interest in the spot market.
PVC Outlook and Suggested Action Strategies
30 Days: Continue to buy as needed, pressing for PVC decreases using downward pressure from ethylene as PVC production remains strong. Demand will be the biggest challenge to a successful reduction. 60/90 Days: Supplies will continue at higher levels in Q3 for ethylene and PVC, with chlorine output recovering from maintenance and outage. The supply/demand balance will determine the degree to which lower pricing is realized in Q3. Buy as needed.
PET Drivers
The recent bullishness in Asian PX & PTA has pushed expectations for the US July PET contract settlements higher.
Market Overview
Some producers are still trying to push increases on the back of higher comonomer costs (PIA/DEG), and now they have additional support due to higher PX/PTA in Asia as well as sturdy domestic demand.
July raw material costs are projected to be $0.005/lb higher, seemingly ending the three months of declines despite being amidst the peak summer season for demand.
WTI crude oil prices have been holding just above the $45/bbl mark, between $46/bbl and $47/bbl. Refinery rates have been mostly stable in the mid 90’s for the past few weeks.
Feedstocks
Paraxylene (PX): Mixed xylene (MX) prices continue to be stable at just above the blending value for gasoline. If crude oil and gasoline prices raise a little higher, upstream MX supplies could tighten and put upward pressure on PX.
PTA: Spot PTA prices in China made a notable jump last week (nearly +10%) due to some production issues at a major supplier. The sudden upward movement in Asia has created some mixed expectations for US contract prices for PX and PTA.
MEG: Three major US producers announced a $0.02/lb increase for August contract prices. The Asian contract price (ACP) for August was heard ranging from $980-990/mt. Inventories in China were seen moving lower while overall supply availability was tight.
PET Outlook and Suggested Action Strategies
30 Days: The potential for a July rollover is slipping; buy at June to avoid the likely increase. 60/90 Days: It is reasonable to expect a gentle incline over the next few months as crude oil stays above $45/bbl and feedstock prices continue to tick higher. Buy earlier to minimize the impact of these increases.
As of today, it is still not completely clear which of the suppliers are delaying the July increase to August. Many of the suppliers continue to pursue the $0.03/lb increase.
Market Overview
There may be a successful attempt to split the HDPE and LL/LDPE price movement, which should be complete by late next week.
Dow sent a letter this week to reaffirm their intent to implement the previously-announced $0.03/lb increase for HDPE effective July 1, 2017. Dow also announced they are delaying the effective date of its previously announced $0.03/lb price increase from July 1st, 2017, to August 1st, 2017, for LLDPE and LDPE.
Nova and Westlake announced a new $0.03/lb price increase effective August 1st on all polyethylene grades. All of Westlake’s previously announced and unimplemented increases have been rescinded.
Formosa Plastics Corporation, Texas has resumed production of all its polyethylene units. The force majeure will remain in effect with sales control or allocation, depending on the various products through the end of July.
HDPE injection molding remains very tight.
Nova’s September/October turnaround will limit incremental pounds for off grade and export.
July exports realized a short-lived increase in LDPE exports this week.
Secondary market activity remains slow. Most resin prices are at June levels
Feedstocks
Ethylene: Spot prices are at the lowest level since February 2016. There is almost no buying interest in the spot market.
Naphtha: Prices are back near $405/mt after losing $20/mt this week. The cost to produce the naphtha pellet is near $0.44/lb.
PE Outlook and Suggested Action Strategies
30 Days: If the LLDPE and LDPE price increase is not implemented in July, the price increase discussion will continue into August. Without any strong market-wide drivers, the chance of the increase remains minimal and prices should remain flat. HDPE injection resin buyers should cover needs early and continue to communicate requirements to suppliers. 60/90 Days: If inventories continue to recover it is reasonable to expect $0.03/lb price erosion in the next 60-90 days if oil remains near or below $45/bbl. There is nothing present that could drive an increase outside a major disruption. Oil prices, soft global demand, and over-supply will be the key drivers for the second half of 2017.
PP Drivers
Two producers pile onto the August increase.
Market Overview
P66 and Ineos both issued letters this week calling for an August increase of $0.03/lb regardless of the monomer move.
Braskem, LBI, and Total previously announced margin expansion attempts for August ranging from $0.03/lb to $0.05/lb. Support from Formosa and Exxon is still absent.
We are getting mixed signals from producers on how they are approaching this increase. Some appear to be committed to going up three. Others are taking a ‘wait and see” approach. Others have indicated a willingness to back off on the amount.
Without Formosa and Exxon, it will be difficult to get market wide movement.
It is also clear that demand is off in July. We are seeing cars show up in the secondary markets and price offers have come down.
This follows one of the strongest demand months on record and a 125 million/lb inventory draw.
One thing is clear, buyers are not desperate for material. They appear to be covered. This is not usually the type of environment that supports margin expansion.
Propylene
Spot PGP last traded at $0.3625/lb.
Dow and FHR PDH units are running but have yet to hit rates.
Ethane is advantaged and could move heavies out of the feed slate.
PP Outlook and Suggested Action Strategies
30 Days: The implied August PGP contract is currently showing a rollover. What happens to PP prices is still TBD. Prepare your arguments and fight the increase. 60/90 Days: There is potential for lower prices for both PGP and PP but we are close to the bottom and do not expect any major downward price moves.
PS Drivers
“Too good to last!” That is the consensus about last month’s PS decrease, which has promptly been followed by a $0.02/lb increase for August.
Market Overview
The proposed increase has the market perplexed as to the validity of such an increase. At the time of this publication, only one producer has proposed the increase. Lacking support from the other producers will make implementation difficult.
Even with the $0.05/lb (GPPS) decrease in July, PS producers still have a margin gain of $0.02/lb year-to date.
Producers believe that the strength of the busy season was delayed due to PS increases in Q1 therefore; demand in July/August will be much stronger.
Feedstocks
Benzene (BZ): Spot prices are actively moving with energy costs; albeit at a slow pace. Supply is balanced due to favorable production runs and yields. Imports remain scarce, with only a few small loads reportedly headed to the USGC. The forward bids/offers range is $2.42-2.55/gal.
Styrene Monomer (SM): Spot prices topped the $0.51/lb mark for the first time since March. However, prices are already being pressured lower due to the price erosion in both Asia and Europe. Europe prices are nearly on par with NA, virtually closing the export arbitrage. LBI is reported to be buying BZ, signifying their POSM unit may be restarting.
Butadiene (BD): The BD spot prices have not found their bottom. Supplies are ample and production vibrant. Exxon has nominated August CP’s at $0.37/lb.
PS Outlook and Suggested Action Strategies
30 Days: The August increase is weak, but you will still need to discuss it with your suppliers. 60/90 Days: Demand has been improving, which could provide some leverage for the producers. Consider buying slightly more than needed during August.
PVC Drivers
Spot ethylene pricing rebounded $0.02/lb over the past week due to re-starts as the PVC supply/demand balance will determine the impact on PVC pricing in August.
Market Overview
June demand grew 5% from increases in both domestic and export demand as production fell 2% (ACC).
Overseas markets saw some slackening of recent price increase pressure as demand eased and export prices were largely flat below $0.38/lb.
The translation of the recent downturn in feedstock costs to PVC price will be challenged by strong domestic demand supported by strong housing numbers in June and recovering upstream production in chlor-alkali.
RMC for PVC moved lower by just over $0.01/lb in June as a drop of $0.005-0.01/lb is expected in July due to lower priced ethylene and modest increases in chlorine.
Supply & Demand
Supply: Upstream chlor-alkali output is recovering in the middle of a strong demand season. Calculated inventories fell by 12% in the final June numbers (ACC), but are 28% ahead of last year.
Demand: Construction demand is strong with rising housing starts and building permits, both above the 1.2 million pace in June.
Feedstocks
Chlorine: Market fundamentals are still tight, with shorter supplies and strong seasonal demand keeping spot prices high.
Ethylene: Spot prices are at the lowest level since February 2016. There is almost no buying interest in the spot market.
PVC Outlook and Suggested Action Strategies
30 Days: Continue to buy as needed, pressing for PVC decreases using downward pressure from ethylene as PVC production remains strong. Demand will be the biggest challenge to a successful reduction. 60/90 Days: Supplies will continue at higher levels in Q3 for ethylene and PVC, with chlorine output recovering from maintenance and outage. The supply/demand balance will determine the degree to which lower pricing is realized in Q3. Buy as needed.
PET Drivers
The recent bullishness in Asian PX & PTA has pushed expectations for the US July PET contract settlements higher.
Market Overview
Some producers are still trying to push increases on the back of higher comonomer costs (PIA/DEG), and now they have additional support due to higher PX/PTA in Asia as well as sturdy domestic demand.
July raw material costs are projected to be $0.005/lb higher, seemingly ending the three months of declines despite being amidst the peak summer season for demand.
WTI crude oil prices have been holding just above the $45/bbl mark, between $46/bbl and $47/bbl. Refinery rates have been mostly stable in the mid 90’s for the past few weeks.
Feedstocks
Paraxylene (PX): Mixed xylene (MX) prices continue to be stable at just above the blending value for gasoline. If crude oil and gasoline prices raise a little higher, upstream MX supplies could tighten and put upward pressure on PX.
PTA: Spot PTA prices in China made a notable jump last week (nearly +10%) due to some production issues at a major supplier. The sudden upward movement in Asia has created some mixed expectations for US contract prices for PX and PTA.
MEG: Three major US producers announced a $0.02/lb increase for August contract prices. The Asian contract price (ACP) for August was heard ranging from $980-990/mt. Inventories in China were seen moving lower while overall supply availability was tight.
PET Outlook and Suggested Action Strategies
30 Days: The potential for a July rollover is slipping; buy at June to avoid the likely increase. 60/90 Days: It is reasonable to expect a gentle incline over the next few months as crude oil stays above $45/bbl and feedstock prices continue to tick higher. Buy earlier to minimize the impact of these increases.
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