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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 07/08/2017 (13:25)
PE Drivers

After several months of unsuccessful attempts to increase prices, two suppliers announced a fresh $0.04/lb price increase for September in addition to the August attempt of $0.03/lb.

Market Overview

LBI and Dow sent letters, announcing they will increase the selling price of all polyethylene resins $0.04/lb, effective September 1st. This increase is in addition to all previously-announced increases, including the previously-announced $0.03/lb increase effective August 1st for all polyethylene resins.

The Dow and Exxon plants are expected to produce pellets in August. There is no new current production information.

There was very little export activity during the first week of August. Bulk packaging facilities are expecting an increase in late August as new capacities start up.

Nova’s August-through-October turnaround will limit incremental pounds for off-grade and export. ▪ Secondary market activity remains slow. Brokers are attempting a price increase from July without success.

Export and inventory data should be available late next week.

Feedstocks

Ethylene: Spot prices improved from the lowest level since February 2016 with some new traders’ activity. Several October turnarounds and new PE capacity is projected to increase prices from today’s low levels.

Naphtha: Higher oil prices pushed naphtha price up about $10/ton this week to $435/ton.

PE Outlook and Suggested Action Strategies

30 Days: Suppliers believe they will achieve the August price increase and will continue to push throughout August. Without any strong market-wide drivers, the chance of the increase remains minimal, and prices should remain flat.

60/90 Days: As inventories continue to recover, it is reasonable to expect $0.03/lb price erosion in the next 60- 90 days if oil returns to 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

Expectations for a Lower PGP settlement in August evaporate!

Market Overview

Spot PGP prices are up about $0.02/lb since mid-July. At a spot value $0.375/lb, the implied contract price for August would be $0.395/lb to $0.40/lb. This leaves us with a flat to up $0.01/lb scenario for August.

PGP is feeling a little bullish. If spot prices push any higher over the next couple weeks, the outlook for contract PGP will move up as well.

One of the key drivers behind propylene monomer’s firmness is that heavy feeds have priced out of the feedslate. Not only is ethane advantaged, but propane and naphtha are at a zero-margin cash cost. This will incentivize crackers towards a max ethane feed as quickly as possible.

Also, Europe suffered an unplanned outage that is opening the export arbitrage for PGP. We are hearing of some shipments getting fixed for the near future.

Rumors surfaced that Exxon was putting out a $0.03/lb PP increase letter for September 1st, but that has not happened yet.

We are also hearing that some producers are considering pushing their August increases out to September now that monomer does not appear to be moving lower.

We also know that July demand was off which is not supportive of margin expansion.

We are expecting producers will still try to bring up the low end of the market in August and then focus on the rest of the market in September.

Dow and FHR PDH units are up, but were not at full rates. We have heard operations are improving.

The EPD PDH is expected to start sometime in the next 30- 60 days.

Propylene

Spot PGP last traded at $0.375/lb.

Spot RGP was seen bid at $0.27/lb via rail.

Dow and FHR PDH units are up, but were not at full rates. We have heard operations are improving.

The EPD PDH is expected to start sometime in the next 30- 60 days.

PP Outlook and Suggested Action Strategies

30 Days: August PP prices will be flat to higher depending on your situation and supply base. We think it will be difficult for indexes to show margin expansion for August and that we will be having this same conversation heading into September.

60/90 Days: Assuming demand maintains its year-to-date average, we think producers will have some success implementing margin at some point during the H2 2017.
PS Drivers

August contract prices for BZ and BD firm lower, squelching any support for the Americas Styrenics August PS increase.

Market Overview

The increase truly had very little chance of success, given the following factors:

Styrolution announces flat prices for August.

Continued price erosion in feedstock cost.

Consecutive monthly RMC declines.

Zero support from the other PS producers.

AmSty has agreed to meet the July Styrolution $0.06/lb decrease on HIPS; Total remains silent.

China imposed a ban on PS scrap imports, effectively halting all scrap imports into China by years’ end.

Feedstocks

Benzene (BZ): August CP’s split; $2.48/gal & $2.49/gal, down $0.02-0.03/gal. The weekly spot price jumped on the heels of stronger CO prices. Outside of the CO price influence, BZ prices are tame due to more sellers than buyers; a better-than expected inventory position, and several key BZ users becoming BZ sellers.

Styrene Monomer (SM): Although the weekly price change is flat, the SM market could be considered bullish. There were an unplanned outage and a reduction in SM operating rates. September trades are already being concluded at a premium over August.

Butadiene (BD): August CP’s split. EMC was down $0.08/lb to $0.37/lb, while all the others down $0.05/lb to $0.40/lb, for a weighted avg split of $0.395/lb. In an interesting development, EMC, TPC, and LBI are reporting they are sold out on BD, which makes the downward settlement curious.

Crude Oil (CO): Prices topped the $50/bbl mark after OPEC announced an August 7-9th meeting to discuss the current production cuts and to challenge those not meeting the cuts to do so. OPEC has also indicated they will be cutting back on exports into NA.
PS Outlook and Suggested Action Strategies

30 Days: August prices should firm flat. Buy sparingly as demand usually tapers off in NA.

60/90 Days: September usually sees an increase in PS demand in Asia, which could increase PS and SM exports. Prices could have the potential to be pressured upwards, unless mitigated by domestic feedstock cost. Buy as needed for now.

PVC Drivers

Contract ethylene for July settled down $0.0125/lb.
Market Overview

Negotiations for PVC pricing will pit lower RMC, led by July ethylene, against restricted supply and demand, with an indication of how the balance is evolving coming from the ACC report next week.

RMC for PVC moved lower by $0.01/lb in June, and another $0.005/lb is expected in July. August is forecasted close to flat, pending a clearer view on ethylene price evolution.

RMC will continue at their lowest level since October 2016 even though PVC prices are up $0.06/lb in the same timeframe.

Export pricing eased fractionally lower this week.

Supply & Demand

Supply: The Formosa FM in Texas has been supplemented by an FM in Europe with Shintech, which may need to put on additional export to support that plant.

Demand: Remains seasonally strong due to construction.

Feedstocks

Chlorine: The recent supply shortages seen over the past few months has started to ease, pulling chlorine spot prices $5/st lower.

Ethylene: Spot prices improved from the lowest level since February 2016 with some new traders’ activity. Several October turnarounds and new PE capacity are projected to increase prices from today’s low levels.

PVC Outlook and Suggested Action Strategies

30 Days: Buy as needed, pressing for PVC decreases as costs remain lower and PVC prices higher with expanded margin. You will be challenged by PVC production outages, but this does not impact the largest volume grades. Demand is the second biggest challenge to a successful reduction.

60/90 Days: Supplies will regain higher levels in September for PVC. The supply/demand balance will determine the degree and speed to which lower pricing is realized in Q3. Buy as needed.

PET Drivers

Both market fundamentals and higher feedstock prices support a potential price increase for August. Market Overview

While operating rates are running high, supply availability for PET is tight, as seasonal demand has become stronger than originally anticipated.

August PET raw material costs are expected to be ~$0.015/lb higher from July. Notable gains in MEG prices (especially in Asia) are the main RMC driver at this time.
WTI crude oil prices have briefly breached the $50/bbl mark this week, now hovering in the high $49’s. Refinery rates continue to sit near 95%.

Feedstocks

Paraxylene (PX): Mixed xylene prices continue to hover just above gasoline blending values. The July US PX contract settled $0.01/lb lower from June, at $0.3975/lb. Spot prices in Asia are steady, but edging higher.

PTA: The formula contract prices for July PTA settled at $0.4168/lb. Forward outlooks show potential for an increase in August. In Asia, PTA is experiencing weak demand with improving supplies.

MEG: Strong import activity is keeping MEG inventories in China high, but sturdy demand alongside expectations for reduced operating rates has been supporting higher MEG pricing over the last few weeks.

PET Outlook and Suggested Action Strategies

30 Days: All drivers are pointing to an increase, with little relief in sight. Buy sooner rather than later to avoid most of the effects of the potential PET price increase.

60/90 Days: Summer demand is likely to taper off in the September/October timeframe, which should put downward pressure on the market dynamic front of the PET price direction. Monitor feedstock prices and crude oil; these will help determine the forward price direction on the RMC front.
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