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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 13/11/2017 (10:43)
PE Drivers

By the end of 2017, an estimated 3.5 billion pounds of new capacity will have commenced since August. Global markets are reacting with the expectations of oversupply.

Market Overview

▪ There are no pending price increases or announcements for November or December.

▪ Dow, Exxon and CP Chem are producing pellets from their new plant start-ups after Hurricane Harvey.

▪ Ineos/Sasol is expected to start their HDPE plant mid-November.

▪CP Chem has launched the restart of the Cedar Bayou plant that suffered the worst of the Harvey destruction.

▪ Ethylene inventories are reported at an all-time high.

▪ The U.S. Energy Information Administration (EIA) said in a report that U.S. crude production rose to 9.6 million barrels per day during the week of Nov. 3, the highest weekly output on record according to federal energy data going back to 1983.

Feedstocks

▪ Ethylene: Spot prices were unchanged this week near $0.25/lb. Traders remain bearish on taking ethylene positions. Currently there are very few spot ethylene trades.

▪ Naphtha: Naphtha prices surged another $20/mt this week to $580/mt. Naphtha is selling at a new 2017 high.

International

▪Asia: Markets changed direction from the two-year high. Future markets are predicting lower prices due to the new NA expansions and the arrival of imports from NA.

▪ Latin America: With their PE plants back in production, NA is supplying LA again. Offers in December are expected to be lower than November.

▪ Europe: November prices are expected to remain firm after the two consecutive months of increases. End of the year demand is expected to slow. High prices are keeping buyers from building inventories.

PE Outlook and Suggested Action Strategies

30 Days: Same as last week: There are no drivers to announce any additional increases. Suppliers can expect price pressure from buyers as the Hurricane Harvey issues are resolved. Manage inventories as needed.

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

Polypropylene Inventory builds 80 million/lbs!

Market Overview

▪ October ACC data was posted yesterday. Our monthly report is forthcoming, but here is a sneak-peek at key data:

- Post-Harvey PP production rebounded 13.5% for a 94.6% operating rate.

- Demand rebounded as well but only to an 89.8% demand rate.

- PP Inventory built by 80 million/lb bringing up Days of Supply to 30-31 days, up from 28.6.

▪ Interesting that following two very soft months of production, and consequently demand, that demand only rebounded by what it did. Real demand is just not pulling its weight. High prices (PGP & PP) are likely contributing factors. It is also possible that certain buyers have placed a decent volume of imports on the water.

▪ Enterprise is in start-up mode for their new PDH unit. Their ETA for production of propylene remains the end of November.

▪ LBI recently stated they are exploring a propylene and polypropylene expansion. No details were available regarding technology and volumes, but LBI does expect to make a decision by the end of 2018.

▪ 2018 polypropylene contract discussions are underway. Please contact your RTi representative for supplier actions and strategy assistance.

Propylene

▪ Spot PGP has moved higher over the past week; low propylene yields from steam crackers and a strong pull from PP production are contributing factors. Roughly 160 million/lb of additional propylene was used in PP production versus September.

▪ Spot PGP last traded at $0.4725/lb, which points towards a flat to higher November settlement.

▪ Spot RGP has a bid/offer of $0.35/lb by $0.36/lb.

▪ Refinery rates were up this week with US rates at 89.6% and PADD3 rates at 92.3%.

▪ EIA propylene inventory increased from 2.52 to 2.57 million/bbl.

RTi PP Outlook and Suggested Action Strategies

30 Days: Expect flat to slightly higher prices for November.

60/90 Days: There is a lot of uncertainty moving forward with the biggest wild card being the start-up of the EPD PDH unit. Goods pounds form this PDH would certainly allow for PGP and PP prices to take a step down.

PVC Drivers

Feedstocks were relatively flat as global demand remained tepid, reflected in flat export pricing.

Market Overview

▪ Export pricing remained below $0.37/lb as demand continued to be restrained going into the winter season for the northern hemisphere.

▪ PVC pricing is expected to reverse October increases before the end of the year with pressure for an additional reduction of $0.01-0.02/lb.

▪ Exports will see the usual spike at the end of the year with seasonal inventory clearing to reduce end-of-year tax liability. December is historically one of the top 3 export months in any given year.

Supply & Demand

▪ Supply: Production operations are strong in PVC with additional support from a tight and higher priced caustic market driving excess chlorine production.

▪ Demand: As the first real blast of winter hits the northern US, seasonal slowing is settling in.

Feedstocks

▪ Chlorine: Unchanged market fundamentals are keeping chlorine prices stable. Current prices are roughly $75/st higher year-over-year.

▪ Ethylene: Spot prices were unchanged this week near $0.25/lb. Traders remain bearish on taking ethylene positions. Currently there are very few spot ethylene trades.

International

▪ Asia: Demand was reportedly soft as supplies are improving. The lack of trades kept PVC pricing stable, despite rising ethylene prices.

▪ Europe: Trading activity was slow, supplies were sufficient, and spot ethylene was €25-30/mt lower for the week. However, the PVC market has yet to react to these forces, keeping prices flat.

RTi PVC Outlook and Suggested Action Strategies

30 Days: The PVC supply chain has stronger operating rates along with lower feedstock costs and export PVC pricing to reverse the recent increase as early as November.

60/90 Days: Supply will improve substantially into early next year as domestic demand will be slower and exports will spike in December. Further price erosion of $0.01-0.02/lb is likely into the new year. Buy as needed while actively demanding price concessions into 2018.

PS Drivers

AmSty is seeking a plus $0.02/lb PS increase in November, Styrolution is flat, and Total has not taken a position.

Market Overview

▪ When presented with a competitive situation, AmSty will meet the Styrolution price direction.

▪ RMC has increased ~$0.04/lb since August. However, PS producers implemented a total of $0.06/lb in increases since August, basically gaining $0.02/lb in margin.

▪ Demand is muted as the market is in the midst of its off-season.

Feedstocks

▪ Benzene (BZ): Spot prices have been very volatile the past few weeks. This week, prices took a hefty jump above the $3.20/gal mark. The supply position has not improved enough to squelch speculative concerns. Prices are still expected to see some relief in the future with the advent of imported material.

▪ Styrene Monomer (SM): Spot prices had a short reprieve before rebounding above the $0.50/lb mark this week. The price shift is attributed to higher BZ prices.

▪ Butadiene (BD): Spot prices continue to track southward with another mild decline this week. Forward spot prices are being offered below the $0.40/lb price point.

International

▪ Europe: PS producers are offering price concessions, but not for the full monomer reduction. They are contending that demand is sufficient enough to warrant only a partial price reduction.

▪ Asia: Weekly SM/PS prices remain unchanged. Forward prices could be pressured lower from soft demand and BD prices.

RTi PS Outlook and Suggested Action Strategies

30 Days: Current market conditions do not warrant another price increase. Firmly resist the AmSty price increase. Avoid buying more than what is needed.

60/90 Days: Producers will try to hold onto their price gains for as long as possible. Demand destruction could be enough to counter the elevated BZ prices. Discuss price concessions with your suppliers utilizing the lack of demand to support your position. Buy JIT

PET Drivers

Rising crude oil prices are putting upward pressure on PET raw material costs.

Market Overview

▪ Spot PET pricing has been stable for the past few weeks as most price drivers have not changed.

▪ USITC import data for September PET has been released, and it showed a ~17.4 million-pound decline in import volumes from August, which is nearly 20% lower than the 2017 year-to-date average. Harvey-related port shutdowns could be to blame for the reduced PET imports.

▪ Imports from nearly every major region experienced a notable decline except for Latin America, which experienced a 13.8 million-pound increase (+45%).

▪ WTI crude oil prices have been on a steady incline for most of October, with this week’s average ending around $57/bbl. EIA refinery rates are just below 90%.

Feedstocks

▪ Paraxylene (PX): Rising crude oil prices have been lifting downstream mixed xylenes (MX) and paraxylene pricing. Recent MX blending values have been pegged near August levels, preHarvey.

▪ PTA: Current outlooks for PX/PTA have shifted to flat to slightly higher for the remainder of 2017. The combination of higher crude oil prices alongside tighter supply availability has kept PTA prices in China bullish.

▪ MEG: US November contracts have settled down $0.02- 0.025/lb from October. MEG prices in China are still stable, while inventories are on the rise, which is creating some bearish expectations for pricing over the next few months.

International

▪ Asia: Sturdy demand continued to support higher PET pricing this week, especially from Japan after the antidumping duty was placed on China, and other countries are now supplying Japanese imports. Feedstock prices were seen on the rise as well.

▪ Europe: Market fundamentals were mostly unchanged weekover-week, but there are concerns about the bullishness in Asia. November PX initially settled €20/mt higher from October.

RTi PET Outlook and Suggested Action Strategies

30 Days: The upward movements in crude oil will start to put more pressure on PET feedstocks, couple that with tighter supplies from M&G issues & antidumping duties, and there are plenty of drivers for a November PET price increase. Buy early to hedge against the potential increase.

60/90 Days: There is still opportunity for pricing to ease off in January/February 2018. Until then, expect flat or higher PET prices.
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