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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 02/10/2017 (10:44)
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

▪ Several suppliers have announced an October 15th $0.03/lb increase.
▪ All three of the August new polyethylene plant startups are now producing resin. Dow, Exxon, and CP Chem’s new plants will help speed the recovery from Harvey and be additional capacity in 2018.
▪ Hexene co-monomer shortage may be the next challenge for the LLDPE resin market. This would be a serious concern for the film and bag industry. Processors should communicate with their resin supplier regarding this potential condition. RTi will continue to follow this latest development.
▪ There were a few offers for export this week to Latin America. Prices were offered in the low $0.60’s BRC FOB Houston.
▪ Off-grade prices continue to sell above $0.68/lb. Brokers turned away offers this week due to lack of demand from their customers.

Feedstocks

▪ Ethylene: Ethylene traders expect weaker ethylene prices as more production restarts. Spot prices fell over $0.02/lb this week.
▪ Naphtha: Naphtha prices gained $25/mt this to $525/mt as oil prices moved toward $52/bbl.

International

▪ Asia: China prepares for a week-long holiday next week. Resin markets will be quiet. Prices returned to pre-Harvey levels near $0.50/lb. Higher naphtha prices could increase post-holiday prices.
▪ 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 September price increased due to high ethylene prices. October ethylene settled €30/mt higher for the second consecutive month.

PE Outlook and Suggested Action Strategies

30 Days: Expect the mid-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 may remain into early 2018.

PP Drivers

PGP settlement remains elusive

Market Overview

▪As of Thursday September 28th, buyers and sellers of propylene were still a ways apart on agreeing to the PGP contract price for the month. Rumors were rampant that it could drag into October, but let’s hope cool heads prevail so that clarity can be had on downstream markets.
▪ Early in the week propylene buyers were digging in on an up $0.04/lb settlement. Sellers seemed willing at up $0.06/lb. Then spot PGP traded up $0.02/lb to $0.4825/lb. Now sellers are asking for up $0.09/lb. We are still projecting that something close to up $0.07/lb gets done which would put the contract price at $0.465/lb.
▪ Formosa will be lifting their Force Majeure on polypropylene for October.
▪ LBI is still ramping up to full rates in the Gulf and expects to be at normal operations by early October.
▪ Converter demand is being reported as strong as buyers try to restock.
▪ Availability into secondary markets is limited.
▪ Propylene monomer is still a big concern moving forward. Wherever PGP settles for September, current indicators point to another increase for October.

Propylene

▪ Spot PGP traded recently at $0.4825/lb.
▪ Spot RGP was bid at $0.37/lb, no offers.
▪ The EPD PDH is delayed 3 weeks. Expected feed into unit roughly late October or early November.
▪ PADD3 refinery rates moved up to 84.9%; a good sign that refinery production is getting back to normal.
▪ PGP arbitrages to other regions are closed which will limit exports and help bring balance to propylene.
▪ Ethane remains advantaged as a steam cracker feed.

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 continues to improve as one FM is expected to end this week and at least one of the 2 remaining FM producers are running at full rates.

Market Overview

▪ Export pricing reversed lower this week, back below $0.41/lb as global markets do not reflect US producer’s view of tighter, higher priced markets. This is a leading indicator of how far the October price increase nomination will go.
▪ Producers have nominated $0.05/lb for October, half of which could be supported by RMC due to higher ethylene, which has not yet settled for August or September.
▪ Beyond RMC, there may be little more for producers to get if not supported by export pricing.
▪ Chlorine prices are steady, even as Olin remains on FM. Strong caustic pricing is supporting strong chlorine production globally.

Supply & Demand

▪ Supply: Although Formosa has ended FM on PE and PP at their Point Comfort plant, PVC remains under FM largely due to VCM supply, running at reduced rates.
▪ Demand: The construction season is expected to be extended as hurricane repairs progress, although the impact on demand will be more gradual during the normally lighter demand season.

Feedstocks

▪ Chlorine: A few force majeures remain in effect. Supplies are tight, but fundamentals have been unchanged, keeping spot pricing stable for the past few weeks.
▪ Ethylene: Ethylene traders expect weaker ethylene prices as more production restarts. Spot prices fell over $0.02/lb this week.

International

▪ Asia: Supplies are forecasted to be shorter. Market fundamentals this week were somewhat stable, with weaker demand in China seemingly balanced by strength in India as buyers returned after the monsoon season. Ethylene prices are still climbing.
▪ Europe: Market fundamentals continued to be balanced and translated in to stable PVC pricing for most of September. October ethylene contracts settled €30/mt higher, at €1,025/mt. This week’s average spot price for ethylene is €28/mt higher.

RTi PVC Outlook and Suggested Action Strategies

30 Days: October production recovery could be substantial if the ramp up process goes smoothly for the remainder of the producers on FM. The speed of recovery and ethylene progression will offer an argument for less than $0.05/lb of increase, in the range of $0.02-0.03/lb.

60/90 Days: Supply will improve substantially 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

September PS rises $0.03/lb, while October is still slated for another $0.03/lb potential increase.

Market Overview

▪ Producers are still quoting Harvey-related outages as incentive for September and October increases, despite the fact that no PS facility was directly affected.
▪ Spot BZ has been somewhat stable, with October contracts likely to see a modest increase. SM prices, however, have begun to ease, which will help to resist some of the upward price pressure on PS.
▪ Both Europe and Asia are starting to see downward pressure from falling SM prices.
▪ ACC PS data for August showed a 30% month-over-month decline in export volumes. Total sales were marginally higher, indicating that most of the demand increase was dedicated to domestic use.

Feedstocks

▪ Benzene (BZ): Forward bids and offers were in the $2.68- 2.75/gal range. Although no settlements have been heard, current expectations are calling for a $0.10-0.15/gal increase in October BZ contracts. The weekly average spot price for BZ fell $0.02/gal week-over-week at $2.72/gal.
▪ Styrene Monomer (SM): Spot price have begun to retreat globally, narrowing the BZ to SM gap in the process (BZ has started to catch up by the end of the week). SM supplies in Europe are strong and improving while demand in Asia is waning, creating bearish market sentiment on SM.
▪ Butadiene (BD): October BD contracts settled $0.10/lb higher, at $0.52/lb. Spot BD prices for the week are $0.025/lb above contract price for October, but still $0.03/lb below peak Harvey activity at the start of the month. Harvey-related logistical issues persist and are managing to slow down supply availability.

International

▪Europe: SM prices have been tumbling since the start of September despite a FM from Styrolution. October SM contracts are expected to be lower, and PS is likely see a similar decrease.

▪ Asia: Weaker demand coupled with rising inventories have been pushing styrene prices lower in Asia, causing downstream PS to follow suit. PS markets in China will slow down next week for a holiday

RTi PS Outlook and Suggested Action Strategies

30 Days: The September increase contained ~$0.01-0.015/lb of margin gain due to the split benzene settlement. The October increase nomination contains a similar margin gain, but lacks market-wide support.
60/90 Days: There is a possibility to return close to pre-Harvey pricing levels by the end of the year, provided feedstock prices and demand soften.
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