Weekly Market Drivers for the USA
by ChemOrbis Editorial Team - content@chemorbis.com
PE Drivers
This week’s inventory data showed a significant draw after the post Harvey shutdowns. However, the inventory levels were not the lowest in the past two years. Recovery is expected to accelerate.
Market Overview
▪ Only a few suppliers have announced an October 15th $0.03/lb increase and several announced for November 1st . The sentiment of the results of the mid-month increase are still mixed.
▪ Sources report the CP Chem hexene production was restarted last weekend; this should dull the hexene panic that was expected later this year.
▪ Exports were reported down 3%. It is important to note this is 3% of production which was down nearly 30%. ▪ Availability concerns appear to be resolved for resins following the Harvey event.
▪ With the exception of the CP Chem Cedar Bayou, most of the production has restarted and availability concerns have faded.
Feedstocks
▪ Ethylene: Spot prices were relatively unchanged this week with only one major PE supplier participating.
▪ Naphtha: Naphtha continued this week at $530/mt as oil remained steady near $50/bbl.
International
▪ Asia: Firmer prices are expected with high feedstocks and lower than average inventories due to the lack of resin from NA.
▪ Latin America: Offers improved this week to LA. 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: Same as last week: Expect the mid-October $0.03/lb price increase to be implemented or potentially delayed to November. Momentum for the $0.03/lb 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. This price level cannot be sustained as inventories recover.
Off-grade buyers should manage inventories with the expectations of improved pricing late Q4.
PP Drivers
Spot PGP down another penny!
Market Overview
▪ Spot PGP was offered at $0.445/lb without any takers. PGP’s real value is likely slightly lower. We are not hearing too much chatter on the October settlement but expect negotiations to pick up into next week.
▪ Current spot prices lean towards a flat settlement; however, higher prices early in the month will be leveraged by sellers.
▪ The propylene market was clearly not accepting of prices in the upper 40s. Demand destruction is evident from export and domestic markets.
▪ Polypropylene inventories are sitting at the very low end of the range; however, the market appears to be getting the supply it needs in most cases.
▪ Spot PP markets are finding it difficult to hold onto post-Harvey prices that were carrying a premium to contract prices.
▪ September ACC numbers showed lower production in September. August and September operating rates came in at 83.5%. The industry had been averaging 91.0% prior to Harvey.
▪ PP inventories are down 135 million pounds between August and September.
▪ Days of supply currently sit at 28.6 days.
Propylene
▪ Spot PGP offered at $0.445/lb.
▪ Spot RGP is valued at $0.33/lb.
▪ PADD3 refinery rates dropped down to 83.7%.
▪ EIA propylene inventory fell from 3.04 to 2.91 million barrels.
▪ Enterprise is expected to begin introducing feed to their new PDH unit over the next month.
RTi PP Outlook and Suggested Action Strategies
30 Days: PGP and polypropylene prices are expected to settle flat to up $0.01/lb or $0.02/lb.
60/90 Days: There remains a margin $0.03/lb margin expansion increase for PP. It hasn’t been fully implemented. There are also two price letters out for November. We are not convinced this will fully got through.
PVC Drivers
Ethylene spot moved higher as PVC export pricing expectations moved lower, maintaining expectations for a lower than nominated settlement.
Market Overview
▪ Export pricing moved below $0.39/lb as demand was limited and pricing expectations for November declined.
▪ The combination of higher RMC and lower export pricing indicates a ceiling of $0.03/lb for the October increase nomination of $0.05/lb with additional downward pressure from declines in export pricing.
▪ Any increase for October will see immediate pressure for reversal by the end of the year with the added pressure of contract negotiations.
Supply & Demand
▪ Supply: Mexichem has officially removed their FM; two remain with Formosa and Oxychem.
▪ Demand: Exports fell 18% in September and domestic demand increased 5%, leading to a calculated inventory draw of 8% to a level 17% below this time last year. October appears steady as processors use inventories to avoid what looks to be a temporary price spike.
Feedstocks
▪ Chlorine: Chlorine prices are stable, but are still expected to fall as the summer demand season wanes and downstream maintenance helps to bolster supplies.
▪ Ethylene: Spot prices were relatively unchanged this week with only one major PE supplier participating.
International
▪ Asia: The combination of slowed buying interest and lower ethylene prices managed to put downward pressure on PVC pricing in Asia this week.
▪ Europe: Mirroring Asia, buying activity in Europe was slow, but pricing remained flat. Ethylene prices were flat to slightly lower week-over-week.
RTi PVC Outlook and Suggested Action Strategies
30 Days: October production recovery continues as producers lift FM with rates improving even where FM persists. The speed of recovery, ethylene progression, and lower export pricing offers an increasing argument for an increase at the lower end of the range of $0.01-0.03/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
PS producers are finding pricing leverage with the recent run-up in spot BZ and SM prices.
Market Overview
▪ PS producers have been citing higher cost to support their October increase. This past week, BZ prices jumped up $0.11/gal and SM $0.02/lb; unfortunately lending some support to the producer’s assumption.
▪ There is still some buyer resistance to the increase, but based on the current BZ/SM prices, the increase has a high probability of succeeding.
▪ The PS producer momentum will be short lived due to a change in PS pricing and demand in global prices.
Feedstocks
▪ Benzene (BZ): Spot prices have rebounded this week. Tighter supplies, improved demand, and a lack of imports all contributed to the recent price spike.
▪ Styrene Monomer (SM): The price erosion was short lived as spot prices took an unexpected rebound this week. The increase is a product of rising BZ prices versus demand. Demand has been muted due to a planned PS TAR. Exports are not viable from a pricing position.
▪ Butadiene (BD): The projected downward price pressure stated in last week’s driver came to fruition this week when spot prices dropped $0.09/lb. Better supply coupled with soft demand helped to support the price erosion.
PET Drivers
Mixed expectations arise for October PET prices, as PX/PTA turn bearish but PET supplies are tight.
Market Overview
▪ Four major producers have filled a petition to the USITC for antidumping duties (ADD) to be placed on PET imports from Brazil, Indonesia, Korea, Pakistan, and Taiwan. The last time ADD were placed on China back in 2016, imports from China became almost non-existent.
▪ The combination of ADD’s (Japan & US on China, US on the countries mentioned above), the shutdown of M&G West Virginia, and the halting of the M&G Corpus Christi facility, all indicate tightening supplies from both imports and domestic capacity.
▪ WTI crude oil prices steadily rose to $52/bbl by the end of the week. Refinery rates dipped to the mid 80’s last week.
Feedstocks
▪ Paraxylene (PX): Mixed xylene blending values for gasoline have been tumbling lower after peaking in early September. Domestic demand showed some weakness as news of the M&G PET facility closure in West Virginia indicates a lessened pull on the PX supply stream.
▪ PTA: The PX/PTA outlook has turned toward flat for the remainder of 2017. Balanced market fundamentals kept PX and PTA prices in Asia stable for the past few weeks, despite the Golden Week holiday earlier this month that slowed buying activity.
▪ MEG: MEG contracts are expected to ease through the next couple of months, in line with bearishness in Asia MEG markets. MEG inventories in China have been steadily gaining since the start of October.
International
▪ Asia: Demand remains firm as most market participants are active after returning from the Golden Week holiday earlier this month.
▪ Europe: Slow demand and strengthening supplies pulled PET prices lower for the second week in a row.
RTi PET Outlook and Suggested Action Strategies
30 Days: Raw material costs are showing the potential for as much as a $0.01/lb decrease. However, fundamentals are favoring an increase, as demand is steady but supplies are tight (and worsening).
60/90 Days: Feedstock prices are projected to be moving lower through the rest of the year. The antidumping duties do pose a threat to imports, and domestic supplies are still adjusting to the M&G financial “crisis”. Whichever of the two (lower feed prices or tighter supplies) gains the most momentum will likely sway the forward PET price direction. Continue to focus on securing resin in the short term to prepare for impending tightness.
This week’s inventory data showed a significant draw after the post Harvey shutdowns. However, the inventory levels were not the lowest in the past two years. Recovery is expected to accelerate.
Market Overview
▪ Only a few suppliers have announced an October 15th $0.03/lb increase and several announced for November 1st . The sentiment of the results of the mid-month increase are still mixed.
▪ Sources report the CP Chem hexene production was restarted last weekend; this should dull the hexene panic that was expected later this year.
▪ Exports were reported down 3%. It is important to note this is 3% of production which was down nearly 30%. ▪ Availability concerns appear to be resolved for resins following the Harvey event.
▪ With the exception of the CP Chem Cedar Bayou, most of the production has restarted and availability concerns have faded.
Feedstocks
▪ Ethylene: Spot prices were relatively unchanged this week with only one major PE supplier participating.
▪ Naphtha: Naphtha continued this week at $530/mt as oil remained steady near $50/bbl.
International
▪ Asia: Firmer prices are expected with high feedstocks and lower than average inventories due to the lack of resin from NA.
▪ Latin America: Offers improved this week to LA. 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: Same as last week: Expect the mid-October $0.03/lb price increase to be implemented or potentially delayed to November. Momentum for the $0.03/lb 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. This price level cannot be sustained as inventories recover.
Off-grade buyers should manage inventories with the expectations of improved pricing late Q4.
PP Drivers
Spot PGP down another penny!
Market Overview
▪ Spot PGP was offered at $0.445/lb without any takers. PGP’s real value is likely slightly lower. We are not hearing too much chatter on the October settlement but expect negotiations to pick up into next week.
▪ Current spot prices lean towards a flat settlement; however, higher prices early in the month will be leveraged by sellers.
▪ The propylene market was clearly not accepting of prices in the upper 40s. Demand destruction is evident from export and domestic markets.
▪ Polypropylene inventories are sitting at the very low end of the range; however, the market appears to be getting the supply it needs in most cases.
▪ Spot PP markets are finding it difficult to hold onto post-Harvey prices that were carrying a premium to contract prices.
▪ September ACC numbers showed lower production in September. August and September operating rates came in at 83.5%. The industry had been averaging 91.0% prior to Harvey.
▪ PP inventories are down 135 million pounds between August and September.
▪ Days of supply currently sit at 28.6 days.
Propylene
▪ Spot PGP offered at $0.445/lb.
▪ Spot RGP is valued at $0.33/lb.
▪ PADD3 refinery rates dropped down to 83.7%.
▪ EIA propylene inventory fell from 3.04 to 2.91 million barrels.
▪ Enterprise is expected to begin introducing feed to their new PDH unit over the next month.
RTi PP Outlook and Suggested Action Strategies
30 Days: PGP and polypropylene prices are expected to settle flat to up $0.01/lb or $0.02/lb.
60/90 Days: There remains a margin $0.03/lb margin expansion increase for PP. It hasn’t been fully implemented. There are also two price letters out for November. We are not convinced this will fully got through.
PVC Drivers
Ethylene spot moved higher as PVC export pricing expectations moved lower, maintaining expectations for a lower than nominated settlement.
Market Overview
▪ Export pricing moved below $0.39/lb as demand was limited and pricing expectations for November declined.
▪ The combination of higher RMC and lower export pricing indicates a ceiling of $0.03/lb for the October increase nomination of $0.05/lb with additional downward pressure from declines in export pricing.
▪ Any increase for October will see immediate pressure for reversal by the end of the year with the added pressure of contract negotiations.
Supply & Demand
▪ Supply: Mexichem has officially removed their FM; two remain with Formosa and Oxychem.
▪ Demand: Exports fell 18% in September and domestic demand increased 5%, leading to a calculated inventory draw of 8% to a level 17% below this time last year. October appears steady as processors use inventories to avoid what looks to be a temporary price spike.
Feedstocks
▪ Chlorine: Chlorine prices are stable, but are still expected to fall as the summer demand season wanes and downstream maintenance helps to bolster supplies.
▪ Ethylene: Spot prices were relatively unchanged this week with only one major PE supplier participating.
International
▪ Asia: The combination of slowed buying interest and lower ethylene prices managed to put downward pressure on PVC pricing in Asia this week.
▪ Europe: Mirroring Asia, buying activity in Europe was slow, but pricing remained flat. Ethylene prices were flat to slightly lower week-over-week.
RTi PVC Outlook and Suggested Action Strategies
30 Days: October production recovery continues as producers lift FM with rates improving even where FM persists. The speed of recovery, ethylene progression, and lower export pricing offers an increasing argument for an increase at the lower end of the range of $0.01-0.03/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
PS producers are finding pricing leverage with the recent run-up in spot BZ and SM prices.
Market Overview
▪ PS producers have been citing higher cost to support their October increase. This past week, BZ prices jumped up $0.11/gal and SM $0.02/lb; unfortunately lending some support to the producer’s assumption.
▪ There is still some buyer resistance to the increase, but based on the current BZ/SM prices, the increase has a high probability of succeeding.
▪ The PS producer momentum will be short lived due to a change in PS pricing and demand in global prices.
Feedstocks
▪ Benzene (BZ): Spot prices have rebounded this week. Tighter supplies, improved demand, and a lack of imports all contributed to the recent price spike.
▪ Styrene Monomer (SM): The price erosion was short lived as spot prices took an unexpected rebound this week. The increase is a product of rising BZ prices versus demand. Demand has been muted due to a planned PS TAR. Exports are not viable from a pricing position.
▪ Butadiene (BD): The projected downward price pressure stated in last week’s driver came to fruition this week when spot prices dropped $0.09/lb. Better supply coupled with soft demand helped to support the price erosion.
PET Drivers
Mixed expectations arise for October PET prices, as PX/PTA turn bearish but PET supplies are tight.
Market Overview
▪ Four major producers have filled a petition to the USITC for antidumping duties (ADD) to be placed on PET imports from Brazil, Indonesia, Korea, Pakistan, and Taiwan. The last time ADD were placed on China back in 2016, imports from China became almost non-existent.
▪ The combination of ADD’s (Japan & US on China, US on the countries mentioned above), the shutdown of M&G West Virginia, and the halting of the M&G Corpus Christi facility, all indicate tightening supplies from both imports and domestic capacity.
▪ WTI crude oil prices steadily rose to $52/bbl by the end of the week. Refinery rates dipped to the mid 80’s last week.
Feedstocks
▪ Paraxylene (PX): Mixed xylene blending values for gasoline have been tumbling lower after peaking in early September. Domestic demand showed some weakness as news of the M&G PET facility closure in West Virginia indicates a lessened pull on the PX supply stream.
▪ PTA: The PX/PTA outlook has turned toward flat for the remainder of 2017. Balanced market fundamentals kept PX and PTA prices in Asia stable for the past few weeks, despite the Golden Week holiday earlier this month that slowed buying activity.
▪ MEG: MEG contracts are expected to ease through the next couple of months, in line with bearishness in Asia MEG markets. MEG inventories in China have been steadily gaining since the start of October.
International
▪ Asia: Demand remains firm as most market participants are active after returning from the Golden Week holiday earlier this month.
▪ Europe: Slow demand and strengthening supplies pulled PET prices lower for the second week in a row.
RTi PET Outlook and Suggested Action Strategies
30 Days: Raw material costs are showing the potential for as much as a $0.01/lb decrease. However, fundamentals are favoring an increase, as demand is steady but supplies are tight (and worsening).
60/90 Days: Feedstock prices are projected to be moving lower through the rest of the year. The antidumping duties do pose a threat to imports, and domestic supplies are still adjusting to the M&G financial “crisis”. Whichever of the two (lower feed prices or tighter supplies) gains the most momentum will likely sway the forward PET price direction. Continue to focus on securing resin in the short term to prepare for impending tightness.
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