Weekly Market Drivers for the USA
by ChemOrbis Editorial Team - content@chemorbis.com
PE Drivers
The November 200 million-pound inventory gain, with production rates near the historical average, marks the conclusion of the post Harvey resin concerns and clears the path for price increase roll-backs.
Market Overview
▪ There are no pending PE price increases.
▪ The final of the four 2H 2017 new start-ups commenced last week. Since August; CP Chem, Exxon, Dow, and Ineos/Sasol last week. Nova has also successfully completed the September/October turnaround.
▪ Non-market and unpublished price movement discussions are beginning as the year ends. Initial numbers are from $0.02-0.03/lb; this is not market wide or resin specific.
▪ Global prices continue to remain firm in line with higher oil prices. Oil price declines were halted this week with the reports of a UK pipeline leak that is expected to be shut down for several weeks.
▪ There are expectations for increased 2018 Q1 exports due to higher cost and lower inventories to SEA/China.
▪ The International Energy Agency reported Thursday that global oil supply has jumped to a one-year high as U.S. shale producers roar back to life, while data from the Energy Information Administration Wednesday showed a bigger-than-expected weekly drop in U.S. crude inventories, along with a climb in domestic production to its highest weekly level on record at the EIA.
Feedstocks
▪ Ethylene: Spot prices stayed firm this week. 2018 Q1 prices should remain stable unless PE the new PE demand exceeds the new ethylene capacities.
▪ Naphtha: As expected, naphtha prices fell $15/mt this week as oil weakened to $58/bbl.
International
▪ Asia: Lower inventories and higher energy costs continue to support higher prices in China. China is looking to buy from the NA market to create competitive pricing.
▪ Latin America: Buyers remain on the sidelines with additional lower price expectations in January. Prices have declined as much as $0.05-0.07/lb since the post hurricane peak.
▪ Europe: Suppliers continue to attempt an increase in December of about $0.025/lb. It appears that some or all of the increase will be implemented regardless of weak demand. This is a feedstock driven increase and not supported by demand.
PE Outlook and Suggested Action Strategies
30 Days: No change from last week: There is a potential of a $0.03/lb decrease in December. Excess supply may not contribute to a December decrease but it is expected to in January; 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. Off-grade buyers should continue to manage inventories with intermittent improved pricing.
PP Drivers
Spot PGP rallies!
Market Overview
▪ US PGP spot prices are $0.0225/lb over the past week. PGP last traded at $0.38/lb and was followed by a bid at $0.385/lb.
▪ December contract PGP talks have been absent, but current indicators point to higher settlement of up $0.01/lb to $0.02/lb.
▪ Polypropylene imports saw a big jump in October following the Harvey outages. Imports were up almost 35 million pounds, or +61.0% from September.
▪ We would expect that November volumes will be similar. As a reference, October 2017 import volumes were 89.8 million pounds. 2017 imports are averaging 58.1 million pounds per month. In 2016, monthly imports averaged 83.2 million pounds and reached a high of 115 million pounds. The October 2017 import volumes were significant.
▪ From the recent ACC preliminary numbers for November, PP inventories built by 48.6 million pounds. Days of Supply are 31.3 days. ▪ November operating rates were 93.8% and demand rates were 90.7%.
Propylene
▪ Spot PGP trades at $0.485/lb. ▪ Spot RGP is valued at $0.3825/lb. ▪ Refineries rates are at 93.4% (US) and 94.9% (PADD3).
▪ EIA propylene inventories were down from 2.57 to 2.48 million/bbl.
▪ There are a couple cracker outages as well as an Enterprise splitter that is down.
▪ The new Enterprise PDH unit has not reported any on-spec material at this point.
▪ 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: December is likely to see higher prices based on PGP movement. We do not see any margin expansion for polypropylene but expect it to move higher with PGP.
60/90 Days: We think PP price will move PGP in the near term. Price relief is dependent on the EPD PDH unit.
PVC Drivers
Falling ethane spot due to cracker outages is acting as a drag on ethylene spot pricing. PVC negotiations slowly progress to an inevitable reduction.
Market Overview
▪ Export pricing moved up to $0.36/lb, as global demand and price continued edging upward.
▪ RMC are expected down by $0.005-0.01/lb in December, even with some cracker outages underway as caustic demand continues to drive chlorine production.
▪ October PVC increases are being reversed with contract negotiations taking advantage of lower RMC and low export prices to push pricing below September levels by the beginning of the year.
Supply & Demand
▪ Supply: Westlake is in restart from a planned outage. Availability remains good.
▪ Demand: Cold/snowy weather and bearish price expectations have started reducing demand.
Feedstocks
▪ Chlorine: Market fundamentals are unchanged from last week; demand is weak and supplies are improving.
▪ Ethylene: Spot prices stayed firm this week. 2018 Q1 prices should remain stable unless PE the new PE demand exceeds the new ethylene capacities.
International
▪ Asia: PVC operating rates have been lower due to more stringent environmental regulations. Demand has seen a slight increase. Firmer demand and reduced supply availability has pushed PVC prices up ~$15/mt from last week.
▪ Europe: Market participants are expecting flat December PVC pricing as a result of weaker seasonal demand that is minimizing the effects of the higher December ethylene contract settlement.
RTi PVC Outlook and Suggested Action Strategies
30 Days: Operating rates expected above 90% in November, along with easing feedstock costs and low export PVC pricing, will lead to price movement $0.01-0.02/lb below September levels by January. Buy as needed while looking for lower pricing with new purchases.
60/90 Days: Supply is expected to be strong into Q1 as domestic demand will be seasonally slower. Buy as needed while enjoying lower prices to start the new year.
PS Drivers
PS sales outpaced production according to the November ACC preliminary report.
Market Overview
▪ In a bizarre twist, November production dramatically declined relative to October which had to work through production outages from the hurricane.
▪ Producers will undoubtedly be “smacking their lips” as this new development will, in all probability, help solidify their December increase in full.
▪ Total and AmSty announced a plus $0.06/lb; Styro only $0.05/lb.
Supply/Demand
▪ Operating rates were reduced by 9%, contributing to one of the years steepest inventory draws (52 mmlbs).
▪ Production hit a 17-month low.
Feedstocks
▪ Benzene (BZ): BZ spot prices continued their erratic behavior this week. The recent uptick could be related to the increase in CO prices. The forward bids/offers range is $3.24/gal to $3.35/gal.
▪ Styrene Monomer (SM): After nearing the $0.60/lb mark last week, spot prices had a mild retraction. January trades are being concluded around the $0.55/lb price point. Supplies will become snug, but if demand is weak, it could prohibit SM prices from escalating.
▪ Butadiene (BD): Spot prices have been stable for several weeks due to limited trading.
International
▪ Europe: December CP’s firmed: SM +€95/mt and BZ +€145/mt, which is creating a 15% increase in SM costs. Weak demand may offset any pricing leverage producers have from the feedstock price position.
▪ Asia: A hesitant market sent SM trades slightly lower this week. Traders are apprehensive about taking a long position on supplies, thus putting their inventory at low levels.
RTi PS Outlook and Suggested Action Strategies
30 Days: Prepare to take all or part of the increase. Push for half of what was announced.
60/90 Days: If BZ prices remain static, and PS demand takes a significant hit, it may be worth it to asking your suppliers for some price concessions.
PET Drivers
Firm raw material costs and continued supply tightness incentivize a December PET price increase.
Market Overview
▪ Many PET buyers are now reporting difficulty securing resin. The M&G financial crisis is keeping domestic supply tight while antidumping duties are reducing imported resin.
▪ M&G has been searching for potential buyers for the Corpus Christi PET facility project. If a buyer is found within a reasonable amount of time, then we could see this capacity online by late 2018.
▪ WTI crude oil prices have been fluctuating between $56 and $59/bbl for the past few weeks. Refinery rates remain in the low-to-mid 90’s.
Feedstocks
▪ Paraxylene (PX): Upstream mixed xylene blending values have started to ease after nearly three weeks of increases due to a build in gasoline inventories. Weakened demand is adding downward pressure on domestic PX spot prices.
▪ PTA: Concerns over PX/PTA inventories is creating bullish expectations for the December contract settlements. Current outlooks put December PTA at flat to $0.01/lb higher than November, but prices are expected to reverse course through Q1 2018 as supplies recover and demand wanes.
▪ MEG: US supplies are reportedly tighter, pushing spot prices higher. In China, market drivers were somewhat mixed as downstream bearishness was balanced by a decline in inventory volumes.
International
▪ Asia: US and Japan ADD continues to keep regional export demand strong and PET pricing on the rise. Feedstock prices are mixed, allowing the supply situation to take the lead as primary price driver at this time.
▪ Europe: Supplies are on the weaker side as a few disruptions have limited spot supplies, but seasonal demand is also slow. The combination of both seemingly balanced out, allowing pricing to remain flat this week.
RTi PET Outlook and Suggested Action Strategies
30 Days: December is poised for an increase based on expectations for higher raw material costs and shortened supply availability. Focus on securing resin, even if it comes with a premium, as many sources are reporting supply difficulties.
60/90 Days: The main focus entering 2018 will be tight North American supplies and rising PET prices instead of RMC. Keep a lookout for new import opportunities and monitor the M&G financial situation; if another supplier buys M&G assets, we could easily see that lost capacity come back online.
The November 200 million-pound inventory gain, with production rates near the historical average, marks the conclusion of the post Harvey resin concerns and clears the path for price increase roll-backs.
Market Overview
▪ There are no pending PE price increases.
▪ The final of the four 2H 2017 new start-ups commenced last week. Since August; CP Chem, Exxon, Dow, and Ineos/Sasol last week. Nova has also successfully completed the September/October turnaround.
▪ Non-market and unpublished price movement discussions are beginning as the year ends. Initial numbers are from $0.02-0.03/lb; this is not market wide or resin specific.
▪ Global prices continue to remain firm in line with higher oil prices. Oil price declines were halted this week with the reports of a UK pipeline leak that is expected to be shut down for several weeks.
▪ There are expectations for increased 2018 Q1 exports due to higher cost and lower inventories to SEA/China.
▪ The International Energy Agency reported Thursday that global oil supply has jumped to a one-year high as U.S. shale producers roar back to life, while data from the Energy Information Administration Wednesday showed a bigger-than-expected weekly drop in U.S. crude inventories, along with a climb in domestic production to its highest weekly level on record at the EIA.
Feedstocks
▪ Ethylene: Spot prices stayed firm this week. 2018 Q1 prices should remain stable unless PE the new PE demand exceeds the new ethylene capacities.
▪ Naphtha: As expected, naphtha prices fell $15/mt this week as oil weakened to $58/bbl.
International
▪ Asia: Lower inventories and higher energy costs continue to support higher prices in China. China is looking to buy from the NA market to create competitive pricing.
▪ Latin America: Buyers remain on the sidelines with additional lower price expectations in January. Prices have declined as much as $0.05-0.07/lb since the post hurricane peak.
▪ Europe: Suppliers continue to attempt an increase in December of about $0.025/lb. It appears that some or all of the increase will be implemented regardless of weak demand. This is a feedstock driven increase and not supported by demand.
PE Outlook and Suggested Action Strategies
30 Days: No change from last week: There is a potential of a $0.03/lb decrease in December. Excess supply may not contribute to a December decrease but it is expected to in January; 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. Off-grade buyers should continue to manage inventories with intermittent improved pricing.
PP Drivers
Spot PGP rallies!
Market Overview
▪ US PGP spot prices are $0.0225/lb over the past week. PGP last traded at $0.38/lb and was followed by a bid at $0.385/lb.
▪ December contract PGP talks have been absent, but current indicators point to higher settlement of up $0.01/lb to $0.02/lb.
▪ Polypropylene imports saw a big jump in October following the Harvey outages. Imports were up almost 35 million pounds, or +61.0% from September.
▪ We would expect that November volumes will be similar. As a reference, October 2017 import volumes were 89.8 million pounds. 2017 imports are averaging 58.1 million pounds per month. In 2016, monthly imports averaged 83.2 million pounds and reached a high of 115 million pounds. The October 2017 import volumes were significant.
▪ From the recent ACC preliminary numbers for November, PP inventories built by 48.6 million pounds. Days of Supply are 31.3 days. ▪ November operating rates were 93.8% and demand rates were 90.7%.
Propylene
▪ Spot PGP trades at $0.485/lb. ▪ Spot RGP is valued at $0.3825/lb. ▪ Refineries rates are at 93.4% (US) and 94.9% (PADD3).
▪ EIA propylene inventories were down from 2.57 to 2.48 million/bbl.
▪ There are a couple cracker outages as well as an Enterprise splitter that is down.
▪ The new Enterprise PDH unit has not reported any on-spec material at this point.
▪ 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: December is likely to see higher prices based on PGP movement. We do not see any margin expansion for polypropylene but expect it to move higher with PGP.
60/90 Days: We think PP price will move PGP in the near term. Price relief is dependent on the EPD PDH unit.
PVC Drivers
Falling ethane spot due to cracker outages is acting as a drag on ethylene spot pricing. PVC negotiations slowly progress to an inevitable reduction.
Market Overview
▪ Export pricing moved up to $0.36/lb, as global demand and price continued edging upward.
▪ RMC are expected down by $0.005-0.01/lb in December, even with some cracker outages underway as caustic demand continues to drive chlorine production.
▪ October PVC increases are being reversed with contract negotiations taking advantage of lower RMC and low export prices to push pricing below September levels by the beginning of the year.
Supply & Demand
▪ Supply: Westlake is in restart from a planned outage. Availability remains good.
▪ Demand: Cold/snowy weather and bearish price expectations have started reducing demand.
Feedstocks
▪ Chlorine: Market fundamentals are unchanged from last week; demand is weak and supplies are improving.
▪ Ethylene: Spot prices stayed firm this week. 2018 Q1 prices should remain stable unless PE the new PE demand exceeds the new ethylene capacities.
International
▪ Asia: PVC operating rates have been lower due to more stringent environmental regulations. Demand has seen a slight increase. Firmer demand and reduced supply availability has pushed PVC prices up ~$15/mt from last week.
▪ Europe: Market participants are expecting flat December PVC pricing as a result of weaker seasonal demand that is minimizing the effects of the higher December ethylene contract settlement.
RTi PVC Outlook and Suggested Action Strategies
30 Days: Operating rates expected above 90% in November, along with easing feedstock costs and low export PVC pricing, will lead to price movement $0.01-0.02/lb below September levels by January. Buy as needed while looking for lower pricing with new purchases.
60/90 Days: Supply is expected to be strong into Q1 as domestic demand will be seasonally slower. Buy as needed while enjoying lower prices to start the new year.
PS Drivers
PS sales outpaced production according to the November ACC preliminary report.
Market Overview
▪ In a bizarre twist, November production dramatically declined relative to October which had to work through production outages from the hurricane.
▪ Producers will undoubtedly be “smacking their lips” as this new development will, in all probability, help solidify their December increase in full.
▪ Total and AmSty announced a plus $0.06/lb; Styro only $0.05/lb.
Supply/Demand
▪ Operating rates were reduced by 9%, contributing to one of the years steepest inventory draws (52 mmlbs).
▪ Production hit a 17-month low.
Feedstocks
▪ Benzene (BZ): BZ spot prices continued their erratic behavior this week. The recent uptick could be related to the increase in CO prices. The forward bids/offers range is $3.24/gal to $3.35/gal.
▪ Styrene Monomer (SM): After nearing the $0.60/lb mark last week, spot prices had a mild retraction. January trades are being concluded around the $0.55/lb price point. Supplies will become snug, but if demand is weak, it could prohibit SM prices from escalating.
▪ Butadiene (BD): Spot prices have been stable for several weeks due to limited trading.
International
▪ Europe: December CP’s firmed: SM +€95/mt and BZ +€145/mt, which is creating a 15% increase in SM costs. Weak demand may offset any pricing leverage producers have from the feedstock price position.
▪ Asia: A hesitant market sent SM trades slightly lower this week. Traders are apprehensive about taking a long position on supplies, thus putting their inventory at low levels.
RTi PS Outlook and Suggested Action Strategies
30 Days: Prepare to take all or part of the increase. Push for half of what was announced.
60/90 Days: If BZ prices remain static, and PS demand takes a significant hit, it may be worth it to asking your suppliers for some price concessions.
PET Drivers
Firm raw material costs and continued supply tightness incentivize a December PET price increase.
Market Overview
▪ Many PET buyers are now reporting difficulty securing resin. The M&G financial crisis is keeping domestic supply tight while antidumping duties are reducing imported resin.
▪ M&G has been searching for potential buyers for the Corpus Christi PET facility project. If a buyer is found within a reasonable amount of time, then we could see this capacity online by late 2018.
▪ WTI crude oil prices have been fluctuating between $56 and $59/bbl for the past few weeks. Refinery rates remain in the low-to-mid 90’s.
Feedstocks
▪ Paraxylene (PX): Upstream mixed xylene blending values have started to ease after nearly three weeks of increases due to a build in gasoline inventories. Weakened demand is adding downward pressure on domestic PX spot prices.
▪ PTA: Concerns over PX/PTA inventories is creating bullish expectations for the December contract settlements. Current outlooks put December PTA at flat to $0.01/lb higher than November, but prices are expected to reverse course through Q1 2018 as supplies recover and demand wanes.
▪ MEG: US supplies are reportedly tighter, pushing spot prices higher. In China, market drivers were somewhat mixed as downstream bearishness was balanced by a decline in inventory volumes.
International
▪ Asia: US and Japan ADD continues to keep regional export demand strong and PET pricing on the rise. Feedstock prices are mixed, allowing the supply situation to take the lead as primary price driver at this time.
▪ Europe: Supplies are on the weaker side as a few disruptions have limited spot supplies, but seasonal demand is also slow. The combination of both seemingly balanced out, allowing pricing to remain flat this week.
RTi PET Outlook and Suggested Action Strategies
30 Days: December is poised for an increase based on expectations for higher raw material costs and shortened supply availability. Focus on securing resin, even if it comes with a premium, as many sources are reporting supply difficulties.
60/90 Days: The main focus entering 2018 will be tight North American supplies and rising PET prices instead of RMC. Keep a lookout for new import opportunities and monitor the M&G financial situation; if another supplier buys M&G assets, we could easily see that lost capacity come back online.
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