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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 25/09/2017 (18:21)
PE Drivers

A new mid-October $0.03/lb price increase has been announced, following the implementation of the August $0.03/lb and the September $0.04/lb increase. The duration of resin allocation will determine the strength of the new October increase.

Market Overview

▪ The PE market and resin outlook has been improving daily, but many concerns remain. Most processors understand their resin positions as most ethylene and polyethylene production has restarted.

▪ PE film manufactures have announced a price increase of 4-6% for new orders in September.

▪ CP Chem’s Cedar Bayou facility may be down as long as two months. This plant supplies HDPE injection, and availability of HDPE is expected be the poorest of the PE resins.

▪ Suppliers continue to offer off-grade resins to brokers at $0.10-0.15/lb higher than pre-Harvey prices.

▪ This week, off-grade resin continues to sell at $0.15-0.25/lb above the pre-hurricane prices.

▪ Continue to follow the RTi Hurricane Updates for weekly changes.
Feedstocks

▪ Ethylene: Polyethylene demand for ethylene is stable as both industries restart and are meeting requirements. Some PE plants are in greater need and are keeping the spot price firm to slightly higher.

▪ Naphtha: Naphtha prices gained slightly to $500/mt as oil prices moved toward $50/bbl.
International

▪ Asia: Pricing changed direction as the high demand season concludes and China prepares for a week-long holiday in October that will slow demand significantly. Prices returned to pre-Harvey levels near $0.50/lb.

▪ Latin America: Prices in the region continue to increase as buyers look to other regions for supply.

▪ Europe: Buyers are expecting price increases in October with firm energy prices after the September price increased due to high ethylene prices. Ethylene settled €30/mt higher for September, at €995/mt.

PE Outlook and Suggested Action Strategies

30 Days: Expect the October $0.03/lb price increase to be implemented. Without additional resin inventories, buyers will remain at the mercy of the results of hurricane Harvey. Continue to manage deliveries/transportation and resin requirements. Expect delivery delays and resin allocations into November.

60/90 Days: Expected firm to higher prices for the remainder of the year. The August, September, and October price increases should not be overlooked and may remain into early 2018.

PP Drivers

Contract PGP awaits September settlement!

Market Overview

▪ All polypropylene assets that were affected by Harvey are operational. There are a few that are still ramping up to rates.

▪ Braskem has stated their Seadrift plant is running. Formosa remains under FM but has stated they expect to be able to remove allocations by October. Total has lifted their FM status. Ineos also remains in FM.

▪ LBI still has assets that have not reached full operating rates, but they expect to be back to normal by month end or early October.

▪ Overall resin availability remains tight, as expected after major outages. We have seen grades of commodity homopolymer made available to the market at prices close to contract type numbers. Other grades such as copolymer and random copolymer are not fairing as well. Spot prices here are commanding significant premiums of $0.10/lb to $0.15/lb.

▪ Assuming average demand rates, we expect supply conditions to remain tight for at least another couple months.

▪ The larger concern appears to be propylene monomer. Even prior to Harvey, propylene had supply issues beginning to develop with refinery maintenance season approaching and an ethane advantage at the steams crackers.

▪ Both of those concerns still exist but with added pressure from multiple other refineries and crackers taking significant downtime due to Harvey. Propylene’s supply concerns could carry into October.

Propylene

▪ Spot PGP is valued at $0.46/lb based on recent bid/offers.

▪ Spot RGP is valued at $0.36/lb.

▪ Dow and FHR PDH units are running. The EPD PDH is delayed 3 weeks. Expected feed into unit is roughly late October or early November.

▪ PADD3 refinery rates got as low as 60.7% from Harvey. Currently, rates are only back to 73.0%.

RTi PP Outlook and Suggested Action Strategies

30 Days: September PP prices are likely to be up by $0.06/lb to $0.08/lb pending a monomer settlement and potential margin expansion.

60/90 Days: Propylene and polypropylene supply remains a concern into October. PGP and PP could see higher prices before topping out.

PVC Drivers

PVC production dropped 10% in August (ACC) to less than 85% as plants shutdown in the advance of Harvey. Demand fell by 1% (ACC) leading to a calculated inventory draw of 9%.

Market Overview

▪ Expect production to fall further in September before recovering in October. Loss of production will see some offset in reduced exports.

▪ Export pricing is reflecting less availability with prices now solidly above $0.41/lb.

▪ Chlorine prices are steady, but ethylene spot saw $0.015/lb increase this week before falling back fractionally.

▪ Raw material costs are expected up $0.02-0.035/lb across August and September due to ethylene, approaching levels last seen in February.

▪ Price increase nominations for October will see support from lost production in August & September.

Supply & Demand

▪ Supply: At least one of the FM producers will be back at full rates this week. The key will be how quickly can higher operating rates be achieved by all with the removal of FM.

▪ Demand: Housing starts in August fell, with starts expected lower in September as well due to the hurricanes. Those reductions will see some offset for hurricane repair and replacement construction.

Feedstocks

▪ Chlorine: A number of force majeures kept chlorine supplies tighter, but also kept demand from downstream PVC weak as well, creating mostly balanced fundamentals and keeping chlorine pricing flat.

▪ Ethylene: ~10% capacity remains offline since Hurricane Harvey. Spot prices are averaging close to $0.06/lb more than August. Q3/Q4 could see ethylene supplies become short after the new PE plant start-ups.

International

▪ Asia: October PVC offers were released this week at $20/mt higher than September, driven by Harvey related outages in Texas coupled with rising seasonal demand in India, but tempered by bearish outlooks in China. Ethylene prices continued to trek higher.

▪ Europe: European PVC market dynamics have yet to be affected by Harvey outages. Instead of the bullishness seen in NA and Asia, European PVC has been flat for most of the month, after reacting to the €30/mt increase in September ethylene contracts.

RTi PVC Outlook and Suggested Action Strategies

30 Days: PVC will see production reductions in September before recovering in October. October recovery could be substantial if the ramp up process goes smoothly for the remainder of this month with strong production expected throughout Q4. The speed of recovery and ethylene progression may offer an argument for less than $0.05/lb of increase.

60/90 Days: Supply will remain tightly balanced through most of Q4 as lost production recovery continues into the slower demand season with exports lower. 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.

PS Drivers

AmericasStyrenics announces a fresh increase for October as feedstock prices start to move higher.

Market Overview

▪ The October proposed PS increase will not endear the processors toward AmSty. PS producers were not directly adversely affected by Hurricane Harvey, but seem fully bent on capitalizing on the event.

▪ The September increase, which is highly probable to succeed, already contains ~$0.015/lb of margin enhancement. Unless feedstock prices and RMC cost spike upwards, the October increase will be a pure margin push.

▪ PS and feed prices in both Europe and Asia are experiencing noteworthy gains weekly, which is a concern as it will eventually pull NA prices upwards too.

Feedstocks

▪ Benzene (BZ): Spot BZ prices were quite flat last week at $2.69/gal, but have since slowly trended up to $2.78/gal by the end of this week. The monthly average price is ~$0.17/gal more than August. October contract price nominations are quiet. Given the current spot price, the CP could firm at a rollover to slightly higher

▪ Styrene Monomer (SM): The retraction in spot prices that we saw last week was short-lived due to a tight supply and elevated global price perspective. The monthly average price is currently trending ~$0.08/lb higher. August CP’s firmed as a rollover to July.

▪ Butadiene (BD): The lack of active trading kept BD prices static for the past several weeks. However, prices this week finally reacted upwards to the tight supply situation. The monthly average price is ~$0.06/lb higher. CP’s for October are projected to have a mild increase. Sources indicated that TPC and Exxon have declared FM on BD and that there is some sales allocation in effect.

▪ Ethylene: ~10% capacity remains offline since Hurricane Harvey. Spot prices are averaging close to $0.06/lb more than August. Q3/Q4 could see ethylene supplies become short after the new PE plant start-ups.

International

▪ Europe: Producers successfully implemented their full €190/mt September PS increase. There are major logistics issues throughout southern Europe which could potentially push prices upward again in the coming weeks.

▪ Asia: BD prices trending upwards while both SM and PS had mild retractions. SM remains tight, so the retraction is a bit of a surprise. Ethylene producers are opting to sell their ethylene versus produce polymers as the net back is much better. This action could help keep SM prices from reversing because more ethylene should be available to SM producers.

RTi PS Outlook and Suggested Action Strategies

30 Days: Continue to challenge the amount of the September increase. The October increase is weak.

60/90 Days: There may be an opportunity in late Q4 to get some/all of the September increase back if demand and feed prices soften.

PET Drivers

Both September and October now have upward price momentum.

Market Overview

▪ Spot PET assessments have been stable as market fundamentals are practically unchanged week-overweek. RMC outlooks shows potential for downward pressure by the end of the year.

▪ Alpek’s decision to stop sourcing PTA to M&G has had M&G customers searching for resin elsewhere, which has been tightening an already bullish PET market.

▪ WTI crude oil prices stayed quite close to $50/bbl throughout the week. Refinery rates are starting to see some improvement, with last week gaining 5.5% (now at 83.2%).

Feedstocks

▪ Paraxylene (PX): Both gasoline and MX blending values have started to ease over the last week as markets attempt to return to normalcy post-Harvey.

▪ PTA: Asian PX/PTA spot prices are leaning towards stagnant at the moment due to a slowdown in demand, while September domestic contracts are still expected to see a $0.01-0.02/lb increase.

▪ MEG: October contacts were nominated $0.03-0.04/lb higher due to Harvey shutdowns. MEG prices in China started to retreat after a few months of bullishness. Demand in China is still reportedly strong and inventories are weaker, but bearish expectations managed to pull MEG pricing lower.

International

▪ Asia: Export activity is still readjusting to the Japanese antidumping duties placed on China. Sources indicate that India may be the new destination for Chinese PET exports. As for sourcing Japan, other countries have noticed an uptick in export demand, causing prices to rise steadily over the past few weeks.

▪ Europe: PET market dynamics have started to balance out postHarvey. Supply tightness still lingers due to the outage from a PET plant in Belgium from a few weeks ago, but demand has somewhat slowed after pre-buying during Harvey has kept buyers content in the short term.

RTi PET Outlook and Suggested Action Strategies

30 Days: Alpek cutting M&G off and Japan’s antidumping duties on China have created a shift in demand as the market adjusts to the changes, artificially bolstering demand in a typically slower season (post-summer bottling).

It has become too difficult to resist a September price increase near the $0.06-0.07/lb range that was announced a couple of weeks ago.

60/90 Days: Outages from Harvey has pushed the expected H2 2017 PET price peak out to October rather than September. Either buy earlier and stock up against a likely October increase or hold out until pressure eases in November/December.
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