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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 09/10/2017 (11:16)
PE Drivers

The momentum for the mid-month $0.03/lb increase may be subsiding despite a strong stance by Dow, Exxon and LBI. Several suppliers did not follow the action and others announced the increase for November. Resin supply availability problems are beginning to settle.

Market Overview

▪ Resin prices have increased $0.07 from July, $0.03 in August, and $0.04 by October 1st .
▪ Only a few suppliers have announced an October 15th $0.03/lb increase and one announced for November 1st .
▪ All three of the August new polyethylene plant startups are now producing and delivering prime resins.
▪ Off-grade prices continue to sell above $0.68/lb. The broker market continues to report tight availability, but they can meet demand.
▪ The U.S. Energy Information Administration reported Wednesday that U.S. oil production hit 9.56 million barrels a day in the week ended September 29th; its highest level since July 2015. Exports were nearly 2 million barrels a day.

Feedstocks
▪ Ethylene: Ethylene traders expect weaker ethylene prices as more production restarts. Spot prices were relatively unchanged this week with only one major PE supplier participating.
▪ Naphtha: Naphtha prices gained $5/mt this week to $530/mt as oil prices moved to $52/bbl.

International

▪ Asia: China is celebrating a National holiday this week and trading was limited. Higher naphtha prices, planned maintenance, and lower imports due to Harvey could increase post-holiday prices.
▪ Latin America: Prices in the region continue to increase as buyers look to other regions for supply. HDPE was offered at $0.62/lb FOB Houston BRC.
▪ Europe: Buyers are resisting price increases irrespective of the October ethylene contract which 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 or potentially delayed to November. Momentum for the $0.03 may begin to show some weakness as the recovery exceeds expectations. Continue to manage deliveries/transportation and resin requirements.
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. Off-grade buyers should manage inventories with the expectations of improved pricing late Q4.

PP Drivers

September PGP settles up $0.07/lb, at $0.465/lb.

Market Overview

▪ With the September PGP settlement behind us, projections for the October settlement are now the focus. Spot PGP is currently valued at $0.48/lb to $0.485/lb. This implies an October contract price of $0.50/lb to $0.51/lb, or up another $0.04/lb.
▪ Refineries are getting back to normal run rates with PADD3 rates rising to 85.6%.
▪ EIA propylene inventories also showed a jump from 3.13 million to 3.31 million barrels.
▪ LBI has announced a $0.04/lb polypropylene increase for November 1st. This is in addition to any movement in the PGP price.
▪ ExxonMobil announced a $0.03/lb polypropylene increase for November 1st. This, too, is in addition to the movement in PGP prices. ExxonMobil was noticeably absent from the previous margin expansion increase that was announced in August. All major PP producers now have some form of margin expansion price increase in the market.
▪ We continue to hear of increased interest in imported polypropylene material. We are not seeing significant volumes get done at this point, but with PGP and potential margin expansion coming this month and next, the arbitrages will continue to open up.
▪ On paper, the spreads between US domestic PP prices and Middle East or Far East prices indicate that imports are doable, including room for packaging needs and inland freight.
▪ Tropical Storm Nate is heading into the Gulf of Mexico and is expected to reach Hurricane force winds. Landfall could happen as early as Sunday somewhere near the Louisiana/Mississippi border.

Propylene

Spot PGP was assessed at $0.48/lb.
▪ Spot RGP was assessed at $0.38/lb.
▪ The EPD PDH is delayed 3 weeks. Expected feed into unit roughly late October or early November.
▪ PADD3 refinery rates moved up to 85.6%. Some planned refinery outages are being pushed out due to production losses from Harvey.
▪ PGP arbitrages are closed to other regions. This will limit exports of PGP which have averaged 120 million pounds per month over the past three months.

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

Ethylene contract settled-up a total of 6 cents for August/September, raising PVC raw material costs by 3 cents as export pricing moved lower.

Market Overview

▪ Export pricing has continued to move lower this past week, now below $0.40/lb as global markets are lower during the week-long holiday in China.
▪ The combination of higher RMC and lower export pricing indicates a potential ceiling of $0.03/lb for the October increase nomination of $0.05/lb.
▪ The spoiler could be a tightening in the supply/demand balance over the next couple of weeks, but with improving operations and expectation of the imminent removal of at least one of the remaining FM declarations, this appears to be less likely.
▪ Eyes are on tropical storm Nate that would be an issue for PVC production if it swings wide left on its modeled path.

Supply & Demand

▪ Supply: All plants are operating while we wait for official removal of FM declarations. Formosa is expected to be last in line toward the end of the month.
▪ Demand: An extended construction season will keep demand steadier in the later part of the year.

Feedstocks

▪ Chlorine: One producer lifted their Force Majeure this week. Chlorine spot prices are expected to decline as supplies start to improve.
▪ Ethylene: Ethylene traders expect weaker ethylene prices as more production restarts. Spot prices were relatively unchanged this week with only one major PE supplier participating.

International

▪ Asia: Demand in India remains strong while other countries in Asia demand is weak, especially as China is out of the market on the Golden Week holiday.
▪ Europe: The October outlook is leaning towards bullish as demand is firm while limited imports are impeding supply availability. Spot PVC prices gained €15/mt this week in response to the higher ethylene contract settlement for October.

RTi PVC Outlook and Suggested Action Strategies

30 Days: October production recovery continues as producers look to lift FM. The speed of recovery, ethylene progression, and lower export pricing offers an argument for an increase in the range of $0.02-0.03/lb.
60/90 Days: Supply will improve substantially through the rest of Q4 as lost production recovery continues with slower exports. Buy as needed once the October increase is in the market, but actively demand price concessions for 2018 volume commitments.
PS Drivers

October PS price pressure is mixed; Lower SM prices and weaker PS demand may offset shorter PS supplies.

Market Overview

▪ Both AmSty and Total have a $0.03/lb increase nominated for October. However, market sentiment about whether this increase will be accepted has been mixed.
▪ Competitively priced imports, although trending higher, continue to arrive at a fair discount to domestic PS pricing.
▪ September exports are likely to be lower, even after ACC reported a 30% decline in August, mainly as a result of Hurricane Harvey redirecting potential exports to satisfy domestic demand.

Feedstocks

▪ Benzene (BZ): While the October contract price settled $0.05- 0.13/gal higher at a $2.74-2.75/gal split, spot prices this week averaged $0.10/gal below the contract prices. Forward bids and offers were in the $2.62-2.68/gal range.
▪ Styrene Monomer (SM): Spot prices have effectively returned to pre-Harvey levels this week. SM had been following the price direction in Asia, which turned south a few weeks ago, but now lower SM prices are being supported by falling spot ethylene and benzene. Demand was reportedly steady while supplies are still tight.
▪ Butadiene (BD): After the $0.10/lb increase in October BD contracts, spot prices have been stable near the $0.55/lb mark. Supply availability is still weak due to Harvey-related logistical issues.

International

▪ Asia: Buying activity in China slowed down amidst the Golden Week holiday. Styrene prices were still assessed lower. A number of turnarounds in SEA have been keeping supplies on the tighter side and supporting higher PS prices for the region.
▪ Europe: October styrene contracts settled €110/mt lower, at €1,250/mt. Declining upstream prices have been pulling European PS pricing downward. Expectations for October are bearish. RTi PS Outlook

RTi PS Outlook and Suggested Action Strategies

30 Days: There is some resistance to the full price increase nominated for October. Raw materials could show more downward movement as styrene is lower, so any increase now could signal margin expansion.
60/90 Days: Keep an eye on feedstock prices and demand. If both start to ease, it is reasonable to expect lower pricing through the remainder of the year.
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