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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 11/09/2017 (10:13)
PE Drivers

Resin suppliers are discussing additional price increases beyond the August $0.03/lb and the September $0.04/lb increase as global resin accessibility concerns intensify.

Market Overview

Most ethylene and polyethylene production is scheduled to restart during the next two weeks. The success of these startups will be essential.

Exxon and CP Chem have followed LBI and Dow with a September 15th $0.04/lb increase. Expect the other resin suppliers to announce increases.

HDPE injection plants were hit the hardest. The availability of HDPE is expected be the poorest of the PE resins.

The railroad reports that approximately 1,650 miles of the original 1,700 affected by Harvey are operational.

Suppliers are offering limited off-grade resins to brokers at $0.10-$0.15 higher than pre-Harvey prices.

This week off-grade resin is now selling at $0.15-0.25/lb above the pre-hurricane prices.

The export market is not receiving any resin and is not expected for some time.

Feedstocks

Ethylene: Only traders are buying spot ethylene as the PE plants are not producing resin. Restarts could push the spot market price up considerably higher.

Naphtha: Naphtha prices increased again, $15/mt higher than last week, up to $495/mt, with oil prices moving toward $50/bbl.

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

Restarts commence post Harvey!

Market Overview

The consensus among plastics and petrochemical market participants is that business is coming back at a good pace. The market impact of Harvey has not fully played out, but operations are beginning to get back to normal.

Based on current spot PGP values, contract PGP for September could settle up in the $0.06/lb to $0.08/lb range.

Polypropylene prices will follow PGP at a minimum. At least one supplier has iterated their intention to implement the margin expansion that was left from August. We agree that the margin expansion could play into PP prices this month.

Refinery restarts are generally progressing well, but the propylene producing FCC units are lagging at some locations.

Steam crackers are also ramping up at a good pace. CPChem Cedar Bayou and Equistar LaPorte are exceptions that could take longer.

Enterprise splitters have restarted, however there is some concern that their PDH start could see delays.

Formosa has restarted 4 of 6 PP lines at Point Comfort. Overall, there appears to be little actual damage at polypropylene producing assets. It is a matter of having feedstock and railcars for restart.

Propylene

Spot PGP traded at $0.4425/lb yesterday and is being bid there Friday morning.

Spot RGP is up to $0.34/lb.

There was a lot of lost propylene production due to Harvey. Plus, we are heading into refinery maintenance season.

The propylene market could stay bullish in the near term.

PP Outlook and Suggested Action Strategies

30 Days: September PP prices are likely to be up by $0.06/lb to $0.10/lb. Availability will be tight. Spot prices are currently carrying a premium to contract prices.

60/90 Days: We expect polypropylene supply to remain tight for the next several months. After September, flat to higher prices are expected.

PS Drivers

Feedstock prices have mixed reactions to Hurricane Harvey

Market Overview

Both BZ and SM monomer spot prices have noteworthy gains while BD spot prices remain static.

The upward movement by BZ and SM is not a surprise. However, BD remaining static is a surprise, given the tight supply position and rising prices in Asia.

Global market prices of ethylene, BZ, and BD are all reacting higher due to speculation that imports from NA will be stymied, as well as NA prices continually pressured upwards.

All producers have announced an increase for September which exceeds the RMC change

Feedstocks

Benzene (BZ): September BZ contracts settled at $2.62- 2.69/gal. Forward bids/offers are fluctuating between $2.62/gal and $2.80/gal. The monthly average price is over $0.20/gal higher than the previous month. Supplies could become extremely short if the refineries stay offline for an extended period-of-time. Imports are minimal.

Styrene Monomer (SM): Intensifying global prices have sent NA export prices up $0.045/lb this week. The September monthly avg price is currently trending $0.12/lb higher. SM is sold out into October. Prices have the propensity of seeing exceptional escalations due to an open export arbitrage and a sold-out market.

Butadiene (BD): The September CP firmed up to $0.02-0.05/lb. All producers are level at $0.42/lb. Spot prices may be undervalued and poised to see some robust price moves. Mounting prices in Asia have reopened the export arbitrage. Exports-imports=higher NA prices.

PS Outlook and Suggested Action Strategies

30 Days: The September increase will probably firm: It is higher than RMC, so processors may have an opportunity to discuss a lower settlement. However, given the circustances, be prepared to pay the full amount.

60/90 Days: PS prices could see an October increase if global feed and PS prices continue to move higher. Buy in September to cover your October needs.

PVC Drivers

Harvey put a 3rd PVC producer into FM due to raw material constraint. The previous 2 FM are still in place, but in the process of restart with capacity running at reduced rates. A nomination for a $0.05/lb October increase is supported by another producer.

Market Overview

Feedstock recovery is underway as significant capacity is still off-line for both ethylene and chlorine.

Raw material costs are expected up $0.03-0.04/lb across August and September due to higher ethylene, reaching levels last seen in February.

Price increase nominations for October will see support from restricted PVC supplies due to lost production from Harvey in addition to reduced operating rates until ethylene, chlor-alkali, and peroxide supplies come back.

Peroxides such as those that came from the Arkema plant are used to initiate polymerization in a number of resins including PVC. Other plants will cover the short-fall, but it is still TBD whether PVC operating rates will be restricted.

Supply & Demand

Supply: With Formosa and Oxy in restart, the key will be how quickly can higher operating rates be achieved with challenges posed by feedstock supplies, logistics and personnel.

Demand: Demand is expected to remains strong with some disruption in downstream markets from the impact of Harvey and Irma that could ultimately add to demand as homes and infrastructure damage is repaired.

Feedstocks

Chlorine: Spot prices finally responded to the Texas outages with a $10/st increase this week.

Ethylene: Only traders are buying spot ethylene as the PE plants are not producing resin. Restarts could push the spot market price up considerably higher.

PVC Outlook and Suggested Action Strategies

30 Days: Harvey has set-up a tight PVC market restricted by raw material and logistics issues through September with some site-specific feedstock outages persisting into October/November. Secure material ahead of an October increase if possible, realizing that volumes are restricted and all buyers are in the same boat. Recovery of supply will determine limited leverage against the increase.

60/90 Days: Market fundamentals are likely to remain tight through Q4 as lost production recovery continues into the slower demand season. Buy as needed once the October increase is in the market, but actively demand substantial price concessions for 2018 volume commitments that are well past Harvey.

PET Drivers

A few major producers announced an aggressive $0.06-0.07/lb increase for September PET.

Market Overview

The lack of any PET facility damage from the hurricane along with a projected $0.03/lb increase in RMC could provide pushback for the $0.06-0.07/lb increase nominations.

Non-formula based PET buyers could see much more of an increase for September than formula based.

Spot PET assessments are now almost 10% above that of pre-Harvey pricing.

WTI crude oil prices peaked at just above $50/bbl, but the weekly average remains near $49/bbl. Refinery rates fell roughly 17% last week due to Hurricane Harvey related outages.

Feedstocks

Paraxylene (PX): US contract prices are already expected to see a $0.02-0.04/lb increase for September. Upstream mixed xylene blending values made some notable gains last week, in line with the changes in gasoline prices.

PTA: Bullish PX will create bullish PTA. The shutdowns in Texas have caused spot prices in China to make steady gains over the last two weeks. September Asian contract price for PX settled $10/mt higher.

MEG: There are still a large number of US MEG facilities that are shut down due to Hurricane Harvey. MEG inventories in China have been falling while prices have been climbing (up more than $0.04/lb in nearly three weeks).

PET Outlook and Suggested Action Strategies

30 Days: Fight back against a potential $0.06-0.07/lb increase, stating that RMC is only projected up $0.03/lb (at most), the hurricane only delayed the M&G PET facility, and the summer bottling demand season is over.

60/90 Days: Price increase pressure could easily continue over the next few months. Buy sooner rather than later to avoid the increases and to hopefully avoid potential shortages.
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