Weekly Market Drivers for the USA
by ChemOrbis Editorial Team - content@chemorbis.com
PE Drivers
The off-grade market prices have peaked. Prices that increased as much as $0.15-$0.20/lb post-Hurricane Harvey are now less than $0.10/lb above the pre-hurricane prices. This driver indicates a weakness for future increases.
Market Overview
▪ Suppliers are implementing the mid-month $0.03/lb increase.
▪ PE prices will be up $0.10/lb above the July price as of November 1st .
▪ Processors are reporting high resin inventories, mostly contributed to a level of September “panic” buying.
▪ EIA forecasts total U.S. crude oil production to average 9.2 million b/d in 2017 and 9.9 million b/d in 2018, which would mark the highest annual average production in U.S. history, surpassing the previous record of 9.6 million b/d in 1970.
Feedstocks
▪ Ethylene: Spot prices retreated this week $0.02/lb to $0.27/lb. Traders are very bearish on taking ethylene positions.
▪ Naphtha: Naphtha remained at $530/mt this week as oil remained steady just above $50/bbl. Naphtha is selling near the 2017 highest price.
International
▪ Asia: The cost to produce a pellet is near $0.50/lb in October. Prices gained several cents in October to the highest prices of the year in the mid-$0.50’s.
▪ Latin America: Offers improved this week to LA. HDPE was offered at $0.62/lb FOB Houston BRC.
▪ Europe: Buyers failed to resist the price increases of the October. PE prices increased in line with the 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 by November 1st. There are no drivers to announce any additional new increases.
60/90 Days: Current price levels cannot be sustained as inventories recover. The resin market prices have peaked and buyers should manage inventories until $0.07-0.10/lb of the recent increases are removed in the next 90-120 days.
PP Drivers
October PGP close to settling up $0.015-0.02/lb!
Market Overview
▪ Buyers and sellers of propylene were close to an October settlement. There was some agreement among certain players at up $0.015/lb, but not everybody was on board. Enterprise was heard to be holding out for up $0.02-0.025/lb.
▪ The likely outcome is a settlement of $0.015/lb, or at most $0.02/lb. In either case, the US price will be the highest in the world.
▪ These price levels are closing demand channels to other regions of the world for propylene itself and its derivatives.
▪ This demand destruction is countering post-Harvey production losses and the loss of heavy feeds in the cracker.
▪ 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 last traded at $0.45/lb
▪ Spot RGP is valued at $0.32/lb.
▪ PADD3 refinery rates dropped down to 83.7%.
▪ EIA propylene inventory fell from 2.91 to 2.68 million/bbl.
▪ 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 $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 fell $0.025/lb as chlorine was steady and export pricing continued lower, leading PVC increase discussions to the $0.03/lb level.
Market Overview
▪ Export pricing moved below $0.38/lb as demand remained limited and pricing expectations for November declined.
▪ The combination of higher RMC and lower export pricing has set a ceiling of $0.03/lb for the October increase, with additional downward pressure from declines in export PVC and ethylene spot pricing that may not be realized until November.
▪ An October increase will see immediate pressure for reversal by the end of the year with the added pressure of contract negotiations.
Supply & Demand
Supply & Demand
▪ Supply: Oxychem has removed their PVC FM, leaving just one FM that is expected to be removed shortly.
▪ Demand: Housing starts and permits each fell more than 4% in September as the after-effects of the hurricane were felt, but remained above the 1-million-mark set a year ago.
Feedstocks
▪ Chlorine: Chlorine spot prices have remained flat since the start of September. Prices are likely to move lower as we continue to move further from the summer demand season and post-Harvey supplies improve.
▪ Ethylene: Spot prices retreated this week $0.02/lb to $0.27/lb. Traders are very bearish on taking ethylene positions.
International
▪ Asia: Offers for November PVC are starting to move lower, with weekly pricing assessments still on the decline.
▪ Europe: Lackluster trading activity was met with mediocre supplies, creating balanced market fundamentals and keeping PVC pricing flat in Europe
RTi PVC Outlook and Suggested Action Strategies
30 Days: The PVC supply chain has recovered with strong operating rates upstream and PVC FM almost completely eliminated. The speed of recovery, lower ethylene spot, and lower export pricing are strong arguments for an increase of no more than $0.03/lb to be followed by a November decrease.
60/90 Days: Supply will improve substantially through the rest of the year as lost production is recovered and exports are slower. Buy as needed once the October increase is in the market and actively demand price concessions for 2018.
PS Drivers
The benzene price spike solidifies the October $0.03/lb PS price increase.
Market Overview
▪ Although PS demand is down, the October price is up the full $0.03/lb.
▪ Raw material cost has increased $0.03/lb since July.
▪ There has been a $0.02/lb PS increase announced for November 1, 2016. This increase is in anticipation of the November BZ contract price firming at current spot levels.
▪ Sales and demand do not support an increase.
▪ PS processors have become more aggressive at qualifying imports. NA PS producers need to be aware of the level of imports because that is volume they may not get back.
▪ The switch to alternate resins on a global basis has also become more prevalent, causing additional concerns for the NA PS producers.
Feedstocks
▪ Benzene (BZ): Spot prices took a 4% jump in one day before backing off slightly. Supply tightness from the refinery change-overs and minimal imports are contributing factors. The November bid/offer range is $2.90/gal to $3.00/gal.
▪ Styrene Monomer (SM): After jumping above the $0.50/lb mark mid-month, spot prices have held steady. Downstream demand weakness, coupled with a Styrolution TAR, has muted trading.
▪ Butadiene (BD): BD spot prices have been static for the past two weeks. Supply/demand is pegged as balanced.
PET Drivers
Raw material cost for October estimated to be slightly lower, offsetting some of the impact of tightened supplies.
Market Overview
▪ Although we haven’t had any confirmed contract settlements for PX/PTA for September or October, the market has almost unified in a +$0.0175/lb & +$0.03/lb increase for the two months respectively.
▪ RMC is now estimated at down $0.005/lb, which is seeming to hold off the increase pressure from reduced supplies from the combination of the M&G financial issues and antidumping duties/petitions.
▪ WTI crude oil prices have been averaging around $52/bbl this week. Refinery rates were seen moving 3.2% higher last week, ending at around 87.8%.
Feedstocks
▪ Paraxylene (PX): Blending values for upstream mixed xylenes have now dipped below pre-Harvey levels. Spot PX in Asia continues to be stable on balanced fundamentals and expectations for flat pricing heading into November.
▪ PTA: PTA supplies in Latin America are likely to improve as Alpek has cut off M&G’s PTA stream to their PET plants in Mexico and Brazil, allowing more material to be directed elsewhere.
▪ MEG: November Asian Contract Prices have been nominated down $70-80/mt from at least three major producers. MEG price pressures in China are a bit mixed, but inventories continued to decline this week.
International
▪ Asia: Strong demand has finally reversed the PET pricing direction after nearly three weeks of lower prices. Feedstocks have been edging lower, especially with nominations of $70- 80/mt MEG contract price decreases from a number of producers.
▪ Europe: Supplies are plentiful as most PET production is back online with strong run rates and decent amount of import volumes from Asia and Latin America. PET prices are now roughly €100/mt lower than the 2017 high back in early September.
RTi PET Outlook and Suggested Action Strategies
30 Days: Price drivers are mixed enough to warrant a flat-to-down $0.01/lb price change for October PET. Push for as much of a decrease as possible.
60/90 Days: Feedstock prices are expected to ease through the remainder of the year, but supplies could remain tight during that timeframe. Focus on securing resin while monitoring RMC. If supplies get as tight as the signs are pointing to, we could easily see higher operating rates and shifting import sources to compensate.
The off-grade market prices have peaked. Prices that increased as much as $0.15-$0.20/lb post-Hurricane Harvey are now less than $0.10/lb above the pre-hurricane prices. This driver indicates a weakness for future increases.
Market Overview
▪ Suppliers are implementing the mid-month $0.03/lb increase.
▪ PE prices will be up $0.10/lb above the July price as of November 1st .
▪ Processors are reporting high resin inventories, mostly contributed to a level of September “panic” buying.
▪ EIA forecasts total U.S. crude oil production to average 9.2 million b/d in 2017 and 9.9 million b/d in 2018, which would mark the highest annual average production in U.S. history, surpassing the previous record of 9.6 million b/d in 1970.
Feedstocks
▪ Ethylene: Spot prices retreated this week $0.02/lb to $0.27/lb. Traders are very bearish on taking ethylene positions.
▪ Naphtha: Naphtha remained at $530/mt this week as oil remained steady just above $50/bbl. Naphtha is selling near the 2017 highest price.
International
▪ Asia: The cost to produce a pellet is near $0.50/lb in October. Prices gained several cents in October to the highest prices of the year in the mid-$0.50’s.
▪ Latin America: Offers improved this week to LA. HDPE was offered at $0.62/lb FOB Houston BRC.
▪ Europe: Buyers failed to resist the price increases of the October. PE prices increased in line with the 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 by November 1st. There are no drivers to announce any additional new increases.
60/90 Days: Current price levels cannot be sustained as inventories recover. The resin market prices have peaked and buyers should manage inventories until $0.07-0.10/lb of the recent increases are removed in the next 90-120 days.
PP Drivers
October PGP close to settling up $0.015-0.02/lb!
Market Overview
▪ Buyers and sellers of propylene were close to an October settlement. There was some agreement among certain players at up $0.015/lb, but not everybody was on board. Enterprise was heard to be holding out for up $0.02-0.025/lb.
▪ The likely outcome is a settlement of $0.015/lb, or at most $0.02/lb. In either case, the US price will be the highest in the world.
▪ These price levels are closing demand channels to other regions of the world for propylene itself and its derivatives.
▪ This demand destruction is countering post-Harvey production losses and the loss of heavy feeds in the cracker.
▪ 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 last traded at $0.45/lb
▪ Spot RGP is valued at $0.32/lb.
▪ PADD3 refinery rates dropped down to 83.7%.
▪ EIA propylene inventory fell from 2.91 to 2.68 million/bbl.
▪ 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 $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 fell $0.025/lb as chlorine was steady and export pricing continued lower, leading PVC increase discussions to the $0.03/lb level.
Market Overview
▪ Export pricing moved below $0.38/lb as demand remained limited and pricing expectations for November declined.
▪ The combination of higher RMC and lower export pricing has set a ceiling of $0.03/lb for the October increase, with additional downward pressure from declines in export PVC and ethylene spot pricing that may not be realized until November.
▪ An October increase will see immediate pressure for reversal by the end of the year with the added pressure of contract negotiations.
Supply & Demand
Supply & Demand
▪ Supply: Oxychem has removed their PVC FM, leaving just one FM that is expected to be removed shortly.
▪ Demand: Housing starts and permits each fell more than 4% in September as the after-effects of the hurricane were felt, but remained above the 1-million-mark set a year ago.
Feedstocks
▪ Chlorine: Chlorine spot prices have remained flat since the start of September. Prices are likely to move lower as we continue to move further from the summer demand season and post-Harvey supplies improve.
▪ Ethylene: Spot prices retreated this week $0.02/lb to $0.27/lb. Traders are very bearish on taking ethylene positions.
International
▪ Asia: Offers for November PVC are starting to move lower, with weekly pricing assessments still on the decline.
▪ Europe: Lackluster trading activity was met with mediocre supplies, creating balanced market fundamentals and keeping PVC pricing flat in Europe
RTi PVC Outlook and Suggested Action Strategies
30 Days: The PVC supply chain has recovered with strong operating rates upstream and PVC FM almost completely eliminated. The speed of recovery, lower ethylene spot, and lower export pricing are strong arguments for an increase of no more than $0.03/lb to be followed by a November decrease.
60/90 Days: Supply will improve substantially through the rest of the year as lost production is recovered and exports are slower. Buy as needed once the October increase is in the market and actively demand price concessions for 2018.
PS Drivers
The benzene price spike solidifies the October $0.03/lb PS price increase.
Market Overview
▪ Although PS demand is down, the October price is up the full $0.03/lb.
▪ Raw material cost has increased $0.03/lb since July.
▪ There has been a $0.02/lb PS increase announced for November 1, 2016. This increase is in anticipation of the November BZ contract price firming at current spot levels.
▪ Sales and demand do not support an increase.
▪ PS processors have become more aggressive at qualifying imports. NA PS producers need to be aware of the level of imports because that is volume they may not get back.
▪ The switch to alternate resins on a global basis has also become more prevalent, causing additional concerns for the NA PS producers.
Feedstocks
▪ Benzene (BZ): Spot prices took a 4% jump in one day before backing off slightly. Supply tightness from the refinery change-overs and minimal imports are contributing factors. The November bid/offer range is $2.90/gal to $3.00/gal.
▪ Styrene Monomer (SM): After jumping above the $0.50/lb mark mid-month, spot prices have held steady. Downstream demand weakness, coupled with a Styrolution TAR, has muted trading.
▪ Butadiene (BD): BD spot prices have been static for the past two weeks. Supply/demand is pegged as balanced.
PET Drivers
Raw material cost for October estimated to be slightly lower, offsetting some of the impact of tightened supplies.
Market Overview
▪ Although we haven’t had any confirmed contract settlements for PX/PTA for September or October, the market has almost unified in a +$0.0175/lb & +$0.03/lb increase for the two months respectively.
▪ RMC is now estimated at down $0.005/lb, which is seeming to hold off the increase pressure from reduced supplies from the combination of the M&G financial issues and antidumping duties/petitions.
▪ WTI crude oil prices have been averaging around $52/bbl this week. Refinery rates were seen moving 3.2% higher last week, ending at around 87.8%.
Feedstocks
▪ Paraxylene (PX): Blending values for upstream mixed xylenes have now dipped below pre-Harvey levels. Spot PX in Asia continues to be stable on balanced fundamentals and expectations for flat pricing heading into November.
▪ PTA: PTA supplies in Latin America are likely to improve as Alpek has cut off M&G’s PTA stream to their PET plants in Mexico and Brazil, allowing more material to be directed elsewhere.
▪ MEG: November Asian Contract Prices have been nominated down $70-80/mt from at least three major producers. MEG price pressures in China are a bit mixed, but inventories continued to decline this week.
International
▪ Asia: Strong demand has finally reversed the PET pricing direction after nearly three weeks of lower prices. Feedstocks have been edging lower, especially with nominations of $70- 80/mt MEG contract price decreases from a number of producers.
▪ Europe: Supplies are plentiful as most PET production is back online with strong run rates and decent amount of import volumes from Asia and Latin America. PET prices are now roughly €100/mt lower than the 2017 high back in early September.
RTi PET Outlook and Suggested Action Strategies
30 Days: Price drivers are mixed enough to warrant a flat-to-down $0.01/lb price change for October PET. Push for as much of a decrease as possible.
60/90 Days: Feedstock prices are expected to ease through the remainder of the year, but supplies could remain tight during that timeframe. Focus on securing resin while monitoring RMC. If supplies get as tight as the signs are pointing to, we could easily see higher operating rates and shifting import sources to compensate.
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