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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 04/09/2017 (12:29)
PE Drivers

Due to the impact of Hurricane Harvey, resin markets can expect more force majeure allocations, resin shortages, and higher prices until the gulf coast region improves.

Market Overview

Any discussion about the $0.03/lb has faded. The August price increase of $0.03/lb is implemented.

LBI and Dow have a September $0.04/lb increase announced. It is uncertain what other supplier’s plans are regarding additional price increase.

Early assessments indicate several HDPE injection plants were hit the hardest.

Every major resin family; HDPE, LDPE, LLDPE has been shut down from multiple suppliers.

Exxon and CP Chem have plants with over four feet of water.

Formosa and LBI have force majeure letters. Expectations are that every supplier in the region should declare force majeure.

More than 50% of the ethylene production is off line.

Railcar shipment have been halted in and out of the Gulf.

Off grade resin sold this week at $0.10-0.20/lb above the pre-hurricane prices.

Feedstocks

Ethylene: Only traders are buying spot ethylene as the PE plants are not producing resin.

Naphtha: Naphtha prices increased again $15/mt higher than last week, again back up to $475/mt

PE Outlook and Suggested Action Strategies

30 Days: Manage deliveries/transportation and resin requirements. Expect delivery delays and resin allocations. Until more information is available regarding the status of rail shipments and plant restarts, there is very little processors can do.

60/90 Days: Expected firm to higher prices for the remainder of the year. The speed to recovery in the Gulf Coast is the key driver.

PP Drivers

The Petrochemical & Plastics Industry suffers major outages in Harvey fallout!

Market Overview

Hurricane Harvey is finally moving out of the Gulf after dropping record rains. Unfortunately, Tropical Storm Irma has formed well out in the Atlantic and is heading west. It is expected to strengthen, but it is too soon to say, with any accuracy, whether it will hit the US.

The ultimate impact of Harvey on propylene & polypropylene is unknown. We do know that as much as 70+% PP plants were shutdown including Braskem (Seadrift & Deer Park), ExxonMobil (Baytown), Formosa (Point Comfort), INEOS (Chocolate Bayou & Deer Park), LBI (Corpus Christi & Deer Park), and Total (Deer Park). This is not to mention the numerous propylene and refineries that are also down.

The August PGP settlement was up $0.005/lb to $0.395/lb. Even prior to Harvey, PGP was already poised to move higher in September. At this point, we should think that PGP and PP are going to move higher by a minimum of $0.05/lb.

With both propylene and PP assets down, the supply/demand effect is about a wash, but downstream demand doesn’t change. The production we lose on PP is gone for good.

We expect to see a lot of rail shipment delays. Keep in close contact with your suppliers. It also makes sense to have an internal risk mitigation plan in place with the expectation that resin deliveries will be affected.

Propylene

Spot PGP had a bid/offer on Friday morning of $0.415/lb by $0.44/lb.

Of all the petrochemicals affected by the storm, propylene appears to be one of the most impacted.

FHR PDH is down. Several big Gulf refineries are down with expectations of 2-3 weeks off-line.

PP Outlook and Suggested Action Strategies

30 Days: August PP prices are pretty well settled at up $0.005/lb. September prices are going higher. PGP increases as well as margin expansion with PP are all in play.

60/90 Days: There’s a lot to consider moving into the 60-90-day outlook. Certainly, the threat of higher prices is there from the effects of Harvey.

PS Drivers

Hurricane Harvey sends benzene prices soaring; polymer prices to follow in September.
Market Overview

August prices should remain flat, but given the magnitude of the devastation, AmSty may use it as a catalyst to push their August increase through.

25% of the refineries are down.
Houston ports closed.
Railcars and truckers are idle due to severe flooding.
The economic impact could total in the $billions.

Early projections indicate that it could take several weeks before things become normal and operations resume.

September PS prices now have an advanced probability of moving higher. AmSty currently has a $0.02/lb increase pending and Styrolution a plus $0.03/lb. Total has not yet announced.

LBI has declared FM on both benzene and styrene.

Feedstocks

Benzene (BZ): September BZ contracts settled $0.14-0.20/gal higher at a $2.62-2.69/gal split. Spot prices reacted to the hurricane by jumping more than $0.20/gal within days. The initial expectation was that the price elevation would not abate anytime soon. However, the forward bids and offers are showing a decline, which is baffling, given LBI’s declaration of FM. The monthly average spot price is over $0.10/gal higher than July.

Styrene Monomer (SM): The monthly average spot price is trending $0.02/lb above July. The daily spot price is steadily moving closer to the $0.60/lb mark; a price point last seen in March. Although the August contract price should firm lower based on the BZ CP decline, the current escalation in spot price and the FM by LBI could send contract prices upwards.

Butadiene (BD): The August monthly average price is below July (by $0.02/lb). However, the daily spot price is already being pressured above $0.40/lb; a price point which has led to September contract nominations of $0.02-0.05/lb. Based on the refinery shutdowns, the final contract price could exceed the nominations. Supply is tightening while downstream demand is accelerating.

PS Outlook and Suggested Action Strategies

30 Days: August should still firm flat, but be preared for a possible push for higher prices. Counter this by stating the market has only been impacted the last couple of days, not the entire month. If you can secure product at August prices, do so.

60/90 Days: Expect higher prices in September and possibly October. When producers have any type of support for an increase, they maximize he opportunity. Monitor the BZ and FM situation, be prepared to buy more than you need in September too.

PVC Drivers

Harvey has put 2 major suppliers into FM with a key chlor-alkali producer also out due to logistics, not hurricane damage. A $0.05/lb increase has been nominated for October.

Market Overview

Feedstock availability is restricted due to both shutdowns and logistics in PVC.

The PVC outage at Formosa in Point Comfort is likely back up within 2 weeks as regulatory filings for restart are in place, giving hope for a faster restart in an area not hit by so much rain.

Some rail lines are starting to open, with the pace to pick-up next week, supporting a potential restart of chloralkali.

Spot ethylene is averaging $0.04/lb higher in August, with production lost from Harvey expected to support pricing in coming months.

PVC costs will be up, but more importantly, lost production leading to a tight market will support higher pricing. The speed of recovery in coming weeks will define how much of the nomination is supported.

Supply & Demand

Supply: Recovery south of Houston is expected to be more rapid than the harder hit areas east and north of Houston that saw far more rain. Operating rates are expected to fall below 80% in September.

Demand: Exports will be restricted by rail and port closures, offering some demand relief as production recovers.

Feedstocks

Chlorine: Pricing assessments were flat this week as the aftermath of Harvey has created some uncertainty in the chlorine markets.

Ethylene: Only traders are buying spot ethylene as the PE plants are not producing resin.

PVC Outlook and Suggested Action Strategies

30 Days: Harvey has set-up a tight PVC market restricted by raw material and logistics issues through mid-September, with more persistent issues in some of the harder hit areas into October. Secure material ahead of an October increase if possible, realizing that volumes are restricted and all buyers are in the same boat. Regular communication with suppliers is key.

60/90 Days: Market fundamentals are likely to remain tight through Q4 as recovery continues and lost production will be recovered over the next few months as supplies improve and demand eases. Buy as needed once the October increase is in the market, but look out for potential price concessions for 2018 volume commitments.

PET Drivers

August PET prices move up $0.015-0.02/lb from July, while potential for a September price increase gains much more momentum.

Market Overview

Although there are no PET facilities in Texas, there are PX and MEG facilities that cannot produce PET feedstocks as a result of Hurricane Harvey. Supply tightening will trickle downstream to PET.

The hurricane will likely delay the completion of the M&G Corpus Christi PET facility even further now, although there hasn’t been any official announcement confirming a delay yet.

Domestic PET spot price assessments moved $0.02-0.03/lb higher from last week.

The weekly average WTI crude oil price was a little more than $1/bbl lower than last week, with end-of-theweek pricing near $47/bbl. Refinery rates last week hit 96.6%, which is a 12-year high.

Feedstocks

Paraxylene (PX): About 63% of US PX capacity is shut down due to the hurricane. Asian contract prices for September are being nominated ~$90/mt higher in response to the lower PX production in Texas.

PTA: There are currently no PTA facilities in Texas, so the hurricane did not affect so operational capacity. However, lower supply availability for upstream PX will easily trickle down to PTA, and put upward price pressure from the supply fundamental perspective.

MEG: Harvey knocked out nearly 60% of US MEG capacity. US contract prices were nominated $0.02-0.03/lb higher for September. MEG prices in Asia started to move higher as a combination of reduced supplies and a typhoon that has delayed deliveries in southern China.

PET Outlook and Suggested Action Strategies

30 Days: Supply shortages should be your biggest concern during the aftermath of the hurricane down near Houston. Get your orders in now and try to stock up if you can.

60/90 Days: It may take a few months before the shutdowns in Texas are lifted, and may be a few more months after that before the market stabilizes. Expect a bullish outlook for perhaps the remainder of the year. Buy whenever you can.
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