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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 20/11/2017 (10:36)
PE Drivers

Demand outpaced production in October as the Harvey shutdowns were being resolved. The inventory draw may delay the expected price decrease in December.

Market Overview

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

▪ Brokers are offering the new start up wide spec resin at a discount to off grade resins.

▪ Export warehouses are expecting a robust Q1 2017 export market.

▪ Contract prices remain firm through mid-November.

▪ Secondary market prices moved lower form October, but have steadied this week.

Feedstocks

▪ Ethylene: Spot prices moved higher this week with one buyer returning for extra ethylene. Price were lower by the end of the week and are expected to remain near $0.25/lb.

▪ Naphtha: Naphtha steadied this week near $575/mt as oil prices fell from $58 to $55/bbl. Naptha prices are at a two year high.

International

▪ Asia: Stable prices have slowed buying activity. Future markets are predicting lower prices due to the new NA expansions and the arrival of imports from NA.

▪ Latin America: Offers in December are expected to be lower than November. Early indications are for a $0.03/lb decrease in December.

▪ 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

Propylene prices remain firm despite continued inventory builds!

Market Overview

▪ Resin producers indicate they are extremely busy and that orders are strong going into the Thanksgiving holiday season.

▪ Secondary market resin prices are dropping from the high prices that were implemented after Hurricane Harvey.

▪ Resin is readily available now and inventories seem to be building back to normal level as all of the resin producers are back to running at normal production levels.

▪ Import resin that was ordered right after the Hurricane is not starting to land in North America. The import event this year will not impact the market like it did in 2016.

▪ High NA resin pricing is limited exporting of Polypropylene to Asia and Europe but there demand in Latin America and NA resin producers have shipments going there.

▪ Inter Pipeline has announced they will be completed with their study on putting a PDH unit and PP complex in Alberta by the end of 2017.

▪ 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.

▪ Spot PGP bid offers are at $0.46/$0.4675 which is pointing towards a flat to higher November settlement.

▪ At this point in time there has been not firm direction of a monthly PGP settlement
▪ Spot RGP was assessed at $0.36.

▪ Refinery rates were up this week with US rates at 91% and PADD3 rates at 92.8%.
▪ EIA propylene inventory increased from 2.57 to 2.6 million/bbl.

RTi PP Outlook and Suggested Action Strategies

30 Days: Same as last week: 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 from this PDH would certainly allow for PGP and PP prices to take a step down.

PVC Drivers

Export pricing continues lower as the domestic market is setting the stage to reverse the October increase.

Market Overview

▪ Export pricing moved below $0.36/lb as demand continued to be restrained going into the winter season and out of the monsoon season for the northern hemisphere.

▪ PVC pricing is expected to reverse October increases before the end of the year, with the majority coming out in November with pressure for an additional reduction of $0.01-0.02/lb by January.

▪ RMC for PVC came down $0.005 in October with a similar reduction expected for November.

Supply & Demand

Supply: Preliminary ACC showed that production rose 13% MOM, up 15% YOY for October to increase calculated inventories by 13% or 54 million lbs. Operations are expected to continue strong for the remainder of the year as the higher priced caustic market is driving strong chlorine production.

▪ Demand: ACC data showed domestic demand up 6% to the highest monthly total since 2008 as exports moved up by 5%.

Feedstocks

▪ Chlorine: Chlorine prices have been flat since the start of September. Downstream caustic soda prices are firm and creating sturdy demand for chlorine.

▪ Ethylene: Spot prices moved higher this week with one buyer returning for extra ethylene. Price were lower by the end of the week and are expected to remain near $0.25/lb.

International

▪ Asia: Market fundamentals were mostly unchanged this week, keeping PVC pricing flat. Trading activity was limited as many participants are awaiting new December offers.

▪ Europe: Much like Asia, supply and demand was balanced and unchanged. Buying activity was reportedly slower and PVC prices were stable.

RTi PVC Outlook and Suggested Action Strategies

30 Days: Stronger operating rates along with lower feedstock costs and lower export PVC pricing will reverse the October increase and lead to further declines. Buy as needed, looking for lower pricing with new purchases.

60/90 Days: Supply is expected strong 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 and Total announce a $0.06/lb increase for December 1st for PS.

Market Overview

▪ The AmSty $0.06/lb increase announcement overrides the $0.02/lb November increase, allowing a rollover for November.

▪ With the November benzene contract settling lower than expected, most market participants are anticipating a December contracts to settle at least $0.16/gal higher.

▪ A higher December BZ contract would support a PS price increase, but muted seasonal demand will add some resistance to the upward pressure.

▪ USITC data showed a roughly 10% reduction in PS exports and a 26% reduction in imports for the month of September, likely as a result of Hurricane Harvey.

▪ PS export prices were seen flat to as much as $0.05/lb lower week-over-week.

Feedstocks

▪ Benzene (BZ): Spot prices continued to show volatility this week, peaking at $3.60/gal at the start and ended up near $3.35/gal by the end of the week; a $0.25/gal swing. November average spot prices are nearly $0.50/gal above November contracts. Supplies are still reportedly tight.

▪ Styrene Monomer (SM): Upstream benzene has been keeping November SM prices firm, but weekly spot prices were marginally lower due to stable market fundamentals. SM exports to Mexico reached an all-time high at 200 mmlbs for September, an 87% increase from August.

▪ Butadiene (BD): Spot prices are now approaching pre-Harvey levels due to improved supply availability and moderate demand in a backwardation situation.

International

▪ Europe: With October being a slow month, many buyers are now entering the market expecting price concessions in line with the monomer contract price decrease. Assessments are still just short of the full SM contract decrease of €90/mt.

▪ Asia: PS demand remains soft. SM prices are now rising upwards of $100/mt week-over-week, mainly as a result of higher crude oil prices. Slower demand managed to ease some of the effects of higher SM, pushing PS prices only ~$20-25/mt higher.

RTi PS Outlook and Suggested Action Strategies

30 Days: With the AmSty November increase delayed until December (with another $0.04/lb added on), it would be reasonable to buy sooner rather than taking a portion of the nominated +$0.06/lb.

60/90 Days: The current market struggle is the balance between demand destruction and rising BZ prices. Continue to discuss price concessions with your suppliers utilizing the lack of demand to support your position. Buy JIT.

PET Drivers

Market tightness persists while raw material costs edge higher.

Market Overview

▪ The combination of the antidumping duties from Japan and US on various countries in Asia is still a concern for imports. Also, the reduced domestic capacity from the M&G financial crisis is keeping supplies tight.

▪ Raw material costs are expected to be $0.005-0.01/lb higher, depending on feedstock contract settlements. Formula based PET contracts would move the same amount, but market contracts could move even higher as a result of the tighter supply situation.

▪ WTI crude oil prices started the week near $57/bbl and have edged lower to around $55/bbl. Refinery rates rose 1.6%, now at 91%.

Feedstocks

▪ Paraxylene (PX): Mixed xylene blending values continue to rise on the back of crude oil prices remaining above $55/bbl. Gasoline inventories are at a 3-year low. Upward price pressure on PX is expected to last through the rest of the year.

▪ PTA: Seasonal demand is easing, but prices are bullish and likely to see increases for both November and December due to stronger upstream costs. PTA supplies in China are weaker, which is supporting price increases.

▪ MEG: Huntsman’s Port Neches, Texas MEG facility has restarted after experiencing roughly 3 months of planned maintenance (exacerbated by Harvey. MEG inventories in China saw another decline last week, and the ACP settled $30/mt higher.

International

▪ Asia: Demand continues to see strength across Asia as non-antidumping duty countries try to source the import demand from both Japan and the US. PET prices were assessed $10-15/mt higher.

▪ Europe: Packaging demand is expected to strengthen as we approach the Christmas season. PET prices were stable this week as market drivers were unchanged.

RTi PET Outlook and Suggested Action Strategies

30 Days: Same market conditions as last week; 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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