Weekly Market Drivers for the USA
Prices remained firm in November. Significant decreases of $0.07/lb or more in December should not be expected. Without an over-supplied market, the suppliers will continue to determine the direction and extent of any decreases.
▪ There are no pending PE price increases.
▪ Minor production issues at several suppliers continues to delay the Hurricane Harvey delivery.
▪ Suppliers are preferring and seeking export opportunities to keep prime and off grade prices firm.
▪ Export warehouses are expecting a robust Q1 2018 export market. Demand for export bags for packing is expected to be strong.
▪ Secondary market prices were lower from October, but have steadied this week. Low off grade prices are near $0.60/lb, down $0.10/lb from the Hurricane Harvey peak.
▪ Oil prices hit a 2 year high this week near $59/bbl. CNBC reported this week: “Reports that OPEC could consider either a six-month extension or a nine-month extension to be reviewed in June have roiled the market. Traders entered the week expecting the deal, which expires in March, to be extended through the end of 2018.”
▪ Ethylene: Spot prices stayed firm this week with one buyer continuing to buy for new start-up ethylene capacity.
▪ Naphtha: Naphtha surged $25/mt this week to near $600/mt as oil prices gained strength to $58. Naptha prices remain at a two year high.
▪ Asia: HDPE prices are at a two year high and may continue to increase. Supply of LLDPE and LDPE are healthy, selling near $0.55-0.60/lb.
▪ Latin America: Offers in December are $0.03/lb lower than November. Mexico is the leading importer of US resin.
▪ Europe: Suppliers will be attempting to regain margins as naphtha increases. Weak demand and good inventories will be a difficult challenge to a new price increase.
PE Outlook and Suggested Action Strategies
30 Days: There is a potential of a $0.03/lb decrease in December. Excess supply may not contribute to a December decrease, however pressure to return a portion of the hurricane increases may contribute to lower prices. 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 30-90 days.
Contract PGP for November settles up $0.01/lb to $0.49/lb!
▪ US PGP prices at $0.49/lb make it the highest price amongst the key regions of the world.
▪ The propylene monomer market remains tightly balanced with the market waiting for the Enterprise PDH unit to come to the rescue. The Enterprise PDH unit is in start-up. The reactor is hot, but they have not been able to make on-spec product yet.
▪ Enterprise recently stated they expect start-up to happen by the end of December.
▪ When this PDH unit begins making good pounds and ramping up to rates, we expect that the supply/demand balance will shift and prices will back off. If EPD runs into any issues that prevent making good pounds, the market will remain tight and vulnerable to further price hikes.
▪ The polypropylene market is also tightly balanced with Days of Supply at 30.1 days heading into November, however, the market also built about 85 million/lb.
▪ Overall, the market appears to be well supplied, and we are seeing certain grades of material being offered into the secondary markets.
▪ PP exports out of the US are challenged due to the currently high cost structure.
▪ 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.
▪ Spot PGP trading has been slow while contract settled. Current value is down slightly to $0.47/lb.
▪ Spot RGP is valued at $0.36/lb to $0.365/lb.
▪ Refineries are running strong with rates at 92.6% (US) and 94.4% (PADD3).
▪ EIA propylene inventory is steady to slightly down at 2.55 million/bbl.
▪ Heavier than ethane feeds at the cracker remain uncompetitive, and this continues to hurt propylene supply.
RTi PP Outlook and Suggested Action Strategies
30 Days: The market is feeling a little top heavy, but the direction moving forward is heavily dependent on the startup of the Enterprise PDH unit.
60/90 Days: We expect the PDH to be running during this timeframe and that prices will start to move lower.
RMC ease lower & export PVC remains low priced. The domestic market starts reversal of the October increase to prepare the way for 2018 negotiations.
▪ Export pricing remained below $0.36/lb as global demand continues to be seasonally restrained.
▪ RMC will move down by $0.005-0.01/lb in November with more to follow in December as ethylene supplies improve and chlorine production is high, supporting higher priced caustic production.
▪ PVC pricing is under early pressure to reverse October increases as early as November with contract negotiations able to take advantage of lower RMC and low export pricing. Pressure for an additional reduction of $0.01-0.02/lb by January.
▪ RMC for PVC came down $0.005/lb in October with a similar reduction expected for November. December should continue the trend with a larger reduction possible.
Supply & Demand
▪ Supply: Supply remains strong with operating rates expected above 90%.
▪ Demand: The mild winter weather to date for much of the country should help maintain construction demand above usual levels with a strong year expected in 2018, especially for remodeling.
▪ Chlorine: Chlorine prices have been flat since the start of September due to slower seasonal demand.
▪ Ethylene: Spot prices stayed firm this week with one buyer continuing to buy for new start-up ethylene capacity.
▪ Asia: December PVC prices were seen moving $50/mt lower than November. While PVC demand in India is strong postmonsoon season, the rest of Asia is experiencing lower activity.
▪ Europe: Both demand and supply availability saw improvements in November, which managed to put downward pressure on PVC pricing at roughly –€10/mt week-over-week.
RTi PVC Outlook and Suggested Action Strategies
30 Days: Operating rates above 90% along with lower feedstock costs and low export PVC pricing is reversing the October increase and will lead to further declines. Buy as needed while looking for lower pricing with new purchases.
60/90 Days: Supply is expected strong into early next year as domestic demand will be seasonally slower and exports will move higher 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.
Escalation of benzene prices may propel PS prices upwards in December
▪AmSty found little support from the other PS producers for their November increase, resulting in prices firming flat for the month.
▪ Their December increase has garnered support from Total, but Styro has yet to commit. Per the PS producers, their justification for the increase is as follow:
o The December BZ contract price firmed $3.30-3.40/gal.
o Demand out-paced Supply o Imports are sold out
o Tight supplies expected into Q1
▪ Demand may have appeared strong due to some pre-buys based on announced increases and a concern that product may take a while to deliver due to logistical issues from the hurricane. However, all that should have been resolved by the end of September to early October. Current demand is pegged as “normal” for this time of year (off-peak season).
▪ The PS producers are enjoying some margin expansion from their August-November PS increases. RMC only went up ~$0.04/lb, while PS prices increased $0.06/lb.
▪ Benzene (BZ): Spot prices are steadily declining from their $3.60/gal peak mid-November. Since then, prices have declined $0.28/gal. The refinery change-over, Harvey outages, and minimal imports reduced the amount of BZ supplies, forcing BZ spot prices upwards. Production is recovering and supplies improving, which is the catalyst for the recent erosion in the spot prices. The monthly average BZ spot price is $0.54/gal higher than the previous month. December CP’s firmed $3.30/gal and $3.40/gal.
▪ Styrene Monomer (SM): Although trading activity has been minimal, trades have firmed at a higher price point. The monthly average prices are $0.02/lb above the previous month. Exports to China have been stymied due to anti-dumping duties. The November/December contract prices have not firmed.
▪ Butadiene (BD): Spot prices ticked up slightly just prior to the holiday before retracting back below the $0.38/lb mark. The uptick may have been a result of speculators believing the price reached its bottom. The monthly average spot price dropped $0.09/lb. December contract prices have firmed at $0.39/lb; down $0.06/lb.
▪ Europe: Buyers are bracing for a potential triple-digit increase in December, resulting in significant pre-buying.
▪ Asia: SM prices systematically are moving northward. Tight supplies from reduced imports and production are pulling the SM prices higher. This is expected to last into Q1.
RTi PS Outlook and Suggested Action Strategies
30 Days: Expect to receive all or part of the $0.06/lb increase. Push for less based on the previous gains from the RMC.
60/90 Days: Due to most feed prices softening, January could see flat to slightly lower prices. However, there is expected to be more buying interest from China. You may want to consider pre-buying early Jan.
November PET pricing mixed as feedstock contracts have yet to settle.
▪ The impending anti-dumping duty sanctions against Brazil, Indonesia, Pakistan, South Korea, and Taiwan has already pushed importers to search elsewhere to avoid expected penalties.
▪ The Chinese ban on imported waste plastics is said to take affect at the start of 2018. While this poses an issue for RPET supplies, it also bolsters demand for virgin grade as an alternative.
▪ WTI crude oil prices peaked near $59/bbl at the start of the week, easing down to nearly $57/bbl near the end. Refinery rates have improved to 92.6%.
▪ Paraxylene (PX): With crude oil prices steadily rising through November, mixed xylene blending values have been stable to slightly higher. November contract prices have mixed expectations, ranging from a rollover to as much as $0.02/lb higher.
▪ PTA: PX/PTA prices are expected to be muted for the rest of the year with potential for bearishness heading into Q1 2018. While prices in Asia have been on an upward trend for most of the month due to higher crude oil prices, recent PTA futures are lower.
▪ MEG: Demand is on the weaker side as downstream PET production has slowed with the M&G closure of the Apple Grove facility. MEG prices in China moved higher this week as inventories fell. The December Asian Contract Price was last seen nominated at +$30/mt from November from at least two producers.
▪ Asia: Supplies are tight and demand is firm, pushing PET prices in Asia $5/mt higher over last week.
▪ Europe: Demand is sturdy for the Christmas packaging season. PET prices are currently stable, but likely to see upward pressure heading into December.
RTi PET Outlook and Suggested Action Strategies
30 Days: With crude oil prices staying above $55/bbl, we could easily see RMC push another half a cent higher in December. However, market participants are still focusing on the supply perspective, which would put additional upward pressure on PET prices.
60/90 Days: There is still opportunity for pricing to ease off in January/February 2018. Either buy at current price levels or hold out until January for potentially lower RMC. Continue to monitor the supply situation and ensure that you are able to secure resin.
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