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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 26/10/2020 (09:13)
PE Drivers

According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, the October $0.05/lb increase is holding firm. The broker market shows early signs of year-end resin market improvement with new offers and lower secondary market pricing.

Market Overview

Supplier Action: The October $0.05/lb price increase has firm supplier support backed by continued demand. There are no additional price increases pending.

YTD Price Change +$0.19/lb: JAN +$0.04, APR ($0.04), JUN +$0.04, JUL +$0.05, AUG +$0.05, SEP +$0.05, OCT +$0.05 pending.

Secondary Market: Off-grade prices have improved for the first time since the April crash. Brokers have softened their tone regarding availability and future pricing.

Export Market: Exports continued to be weak. Low North American inventories and lower prices in SEA/China have stalled activity until NA inventories recover.

Feedstocks

Crude Oil: The OPEC+ group has delayed consideration for oil production increases in January after poor economic news in China and potential future COVID-19 shutdowns.

Ethylene: Spot prices are expected to return to the high teens before year-end, with production exceeding PE demand as weather issues are fully resolved at ethylene plants.

Naphtha: Prices moved down another $20/mt to $390/mt in step with oil movements. Prices are near a 30 day low after peaking at $425/mt last week. Cost to produce ethylene is near $0.30/lb, remaining above the NA cost near $0.10/lb.

International

Asia: Buying was slow upon the return from the National week-long holiday. Buyers remain cautious with good inventories and an uncertain economic outlook in SEA. LLDPE prices are in the low $0.40’s

Latin America: Dow-Mexico announced a $0.04 increase for Latin American customers. LLDPE prime and off-grade offers have improved ahead of expectations of lower prices. LDPE resins are tight due to domestic demand draws in the summer and production problems in Mexico.

Europe: October prices are expected to remain flat from September due to better demand even with lower ethylene costs.

PE Outlook and Suggested Action Strategies

30 Days: After the $0.05/lb price increase for October, buyers should continue to closely manage resin requirements with suppliers until inventories recover. Signals for changing markets are expected; broker markets will lead the discussion and expose any weakness.

60/90 Days: Year-end market-wide contract prime decreases are not likely due to current inventory levels and sustained demand. Reduced COVID-19 resin demand and improved inventory have begun, and levels should improve by late Q4 2020 and help ease Q1 2021 price pressure. Prepare for non-market price decrease during the 2021 contract negotiations.

PP Drivers

Is the October $0.03/lb in jeopardy?

Market Overview

•   Last week, Total announced they were pushing their October $0.03/lb margin expansion to November. This move put the rest of the industry on defense, and now we are seeing other producers capitulate too.
•   We are now hearing one of the major industry indexes reporting that they will not show the $0.03/lb margin increase for October.
•   The bottom line; this market is transitioning from tight to balanced very quickly. Any momentum the sell-side had is dissipating.
•   The market is still showing some tightness, especially for certain grades, as inventories are being rebuilt. But more material is showing up every week, and the hefty premiums in the spot market are no longer being supported.
•   We are seeing sellers very concerned about November and December. They are signalling their ability to supply and have been soliciting orders.
•   2021 contract negotiations are getting underway, and this transition in the market should play well for buyers as the balance of power is shifting.
•   The BASF cracker is still in restart mode. They were applying heat, but we have no official word they have restarted, although reports indicate it is imminent.

Feedstocks

•   Spot PGP last traded at $0.3425/lb and is currently being bid at $0.345/lb, offered at $0.355/lb.
•   Spot RGP is valued at $0.1725/lb.
•   The PGP Nymex average for October is currently at $0.34284/lb.

PP Outlook and Suggested Action Strategies

30 Days: Current indicators point to a flat PGP settlement for October with about a week left in the month. We think polypropylene prices will move with monomer this month and that the increase will fall flat.

60/90 Days: We expect to see spot PGP to move lower with the return of the BASF cracker. Potential margin erosion is also in the cards to close the year.

PVC Drivers

PVC supply chain plants in Louisana affected by Hurricane Laura & Delta are back online, as is a plant that had been down for maintenance, improving the supply & inventory recovery outlook for the remainder of the year.

Market Overview

•   September housing permits (a leading demand indicator) overall showed growth at 5.2% MOM and up 8.1% YOY. Most of that is due to single-family up 7.8% MOM and a very strong increase of 24.8% YOY. Housing starts overall are up 1.9% MOM, but up a more substantial 11.1% YOY. Single-family starts are very strong at up 8.5% MOM and up 22.3% YOY.
•   Chlorine prices moved higher as reduced chlor-alkali op rates due to poor caustic demand are having an impact after seven months of price stability. PVC RMC are forecast up $0.005/lb in October as chlorine increases are partially offset by an ethylene decrease.
•   Preliminary PVC supply/demand figures for Sept from ACC showed a reduction in output due to FM’s down 7% MOM and 10% YOY. Overall demand was down by 7% MOM and 4% YOY as exports fell 26% MOM and 43% YOY. Domestic demand was up 13% MOM and 4% YOY. The impact on inventories was a reduction of 7% MOM and down 43% YOY.
•   The PVC market is tight globally with two fresh FM in Europe this week. As a result, US export prices remained above $0.50/lb as November offers in Asia were up $0.04-0.05/lb, just under $0.50/lb.
•   Unless demand is quickly reversed (snow is flying in northern reaches of the US, but mortgage rates hit a new low) supply constraint globally will help support a $0.04/lb nomination in October as we look to Nov/Dec/Jan for supply/inventory/price recovery.

Feedstocks

Chlorine: Reduced operating rates and sturdy downstream PVC demand pushed chlorine prices higher this week after flat pricing since the last decrease back in March.

Ethylene: About 25% capacity is down due to planned/unplanned outages, but is in the midst of restarting, which is why spot price variations are mild.

International

Asia: The combination of lingering global supply concerns and stronger buying appetite in India led to upward momentum in PVC price assessments in Asia this week.

Europe: Market sentiment is bullish through the end of the year as supply issues are not expected to be resolved until the slower winter season for construction.

PVC Outlook and Suggested Action Strategies

30 Days: PVC output recovery has begun, helping to rebuild inventories late in the year and early next as demand eases with the change in weather and lower exports. Buy as needed.

60/90 Days: The pace of construction will ease in Q4 (but last longer than usual given the late start after virus shutdowns), offering relief to the tight supply/demand balance along with reduced exports. Monitor the timing and strength of production and inventory recovery. Buy as needed as we look towards pulling back some of the increases in 2021.

PS Drivers

Supply dips as operating rates slip while the domestic demand inches upwards.

Market Overview

•   Despite the mild uptick in the demand rate, October PS prices are not in jeopardy of moving upwards due to stable to slightly lower feedstock contract prices. BD spot prices represent the more dramatic change with double-digit increases, but this will not affect the monthly PS contract price.
•   International SM prices can have an adverse effect on NA prices in November if their exorbitant spike continues.
Supply/Demand (ACC September preliminary data):
Year-over-year total demand is not too bad, buoyed by Q3 exports.
⎯ Supply minus 2%
⎯ Operating Rates minus 3%
⎯ Demand Rate plus 3%
⎯ Exports plus 1%
⎯ Capacity

Feedstocks

Benzene (BZ): Spot prices exploded upwards as a direct result of spiking global SM prices. It is not typical for NA BZ prices to be severely influenced by global SM prices, but when Asia hit a one day $100/mt mark, all markets were affected.

Crude Oil (CO): (Rigs +13) This increase in rigs is the most massive all year. Prices are relatively static, with mild fluctuations. OPEC is concerned that demand will suffer from a COVID resurgence.

Ethylene: About 25% capacity is down due to planned/unplanned outages, but are in the midst of restarting, which is why spot price variations are mild.

Styrene Monomer (SM): Spiking global SM prices is pulling NA prices higher. The weekly spot price took a massive 7% jump.

Butadiene (BD): After surpassing the $0.30/lb mark, prices are stable. Supply should improve when more refineries and crackers restart.

International

Asia: SM prices jumped $100/mt (highest one-day total in 2020) due to tight supplies (planned TAR’s) and buyers returning from holiday.

Europe: SM spot spiked $40/mt, influenced by Asian prices. PS producers are bracing a potential price increase in November after getting shut down on a decrease for October.

PS Outlook and Suggested Action Strategies

30 Days: PS producers may attempt an increase in November due to BZ & SM prices. Contact your RTi partner for strategies on how to avoid the rise.

60/90 Days: Global SM prices are a concern. They should stabilize or fall in late November when planned TAR’s conclude.

ABS Drivers

ABS RMC to be flat to down $0.01/lb for October as higher acrylonitrile seems to be offset by lower butadiene and benzene contracts, which would put YTD RMC changes at down $0.09/lb. Elevated spot butadiene would support a higher November contract settlement.

Market Overview

•   September housing permits (a leading indicator) overall showed growth at 5.2% MOM and up 8.1% YOY. Most of that is due to single-family up 7.8% MOM and a very strong increase of 24.8% YOY. Housing starts overall are up 1.9% MOM, but up a more substantial 11.1% YOY. Single-family starts are very strong at up 8.5% MOM and up 22.3% YOY.
•   The IMF issued an improved outlook with 2020 GDP contraction of 4.4% globally from a previous 5.2%. Expansion of 5.2% is forecast for 2021. The US is expected to contract 4.3%, followed by an expansion of 3.1% in 2021.
•   Domestic car sales figures for Q3 indicate a decrease of 9% vs. Q3 2019, down 19% YTD as improvement continues. Year-end projections are down 15-20% for most regions globally, with China the exception, expected down 5-10%.
•   Prolonged COVID concerns on a global scale has dialed back expectations of firm demand and managed to keep WTI pricing around the $40/bbl mark this week. Refinery rates dipped down to 72.9% last week.

Feedstocks

Acrylonitrile (ACN): Supply issues and higher propylene prices have been the root of export price increases for ACN since mid-July, with current ACN pricing indications 26% higher than July.

Butadiene (BD): After surpassing the $0.30/lb mark, prices are stable. Supply should improve when more refineries and crackers restart.

Styrene (SM): Spiking global SM prices is pulling NA prices higher. The weekly spot price took a massive 7% jump.

Benzene (BZ): Spot prices exploded upwards as a direct result of spiking global SM prices. It is not typical for NA BZ prices to be severely influenced by global SM prices, but when Asia hit a one day $100/mt mark, all markets were affected.

Ethylene: About 25% capacity is down due to planned/unplanned outages, but are in the midst of restarting, which is why spot price variations are mild.

International

Asia: Nearly every market driver is pointing upwards for ABS in Asia, with higher feedstock costs (primarily SM), supply concerns, and increased buying activity.

Europe: Bullishness in the Asian markets have pulled European pricing upwards in tandem, with supply issues of their own as well as reduced imports from Asia.

ABS Outlook and Suggested Action Strategies

30 Days: More rapid-than-forecast demand improvement and butadiene impact on RMC are the most significant risk factors that could support pricing escalation. Both demand and RMC are lower than the beginning of the year at this point. Buy as needed with good order planning as you keep an eye on continued demand recovery & RMC.

60/90 Days: Look for significant changes in demand recovery for global auto, E/E, & construction along with RMC. Global demand is increasing, but less than pre-COVID, facilitating stable prices. Monitor the ABS supply chain for disruptions.

PET Drivers

October PET RMC to see a slight increase of around $0.005-0.01/lb as PX/PTA show some increase potential while MEG remains elevated from supply concerns.

Market Overview

•   Import PET started to see some higher weekly prices, stemming primarily from the state of MEG production along the Gulf Coast.
•   PET producers have nominated surcharges of $0.04-0.045/lb for October based on a combination of higher MEG acquisition costs, including spot due to outages from hurricanes and maintenance, as well as higher transportation costs. MEG supplies are expected to improve as we move out of the hurricane season in November and into the new year.
•   Recycle grade PET saw some increased export demand to Mexico this week just as we are approaching the slow season through the winter.
•   Prolonged COVID concerns on a global scale has dialed back expectations of firm demand and managed to keep WTI pricing around the $40/bbl mark this week. Refinery rates dipped down to 72.9% last week.

Feedstocks

Paraxylene (PX): Mixed xylene blending values were stable this week, continuing to match the static nature in the crude oil prices. New capacity expansions set to come online are creating some positive sentiment in the Asian markets, which would reduce PX exports from the US to Asia and push fundamentals to a more bearish state heading into 2021.

PTA: Recent October PX/PTA contract expectations are showing a potential rollover to up half a penny from September. PTA prices in Asia were somewhat mixed as bearish sentiment surrounding the capacity expansions were met with modestly higher buying activity, keeping assessments mostly flat.

MEG: Spot ethylene prices inched back up to $0.225/lb by the end of the week, with pricing expected to return to the high teens by the end of the year. Domestic MEG production is in the recovery process, which will help level off upward price momentum heading into November. Lingering supply concerns, along with decent downstream demand, pushed MEG prices higher in Asia this week.

International

Asia: Increased feedstock costs have been driving incremental PET price increases for several weeks now as bottle demand continues to be lacklustre.

Europe: MEG supply concerns pushed PET pricing higher for the week in Europe.

PET Outlook and Suggested Action Strategies

30 Days: The $0.04-0.05/lb surcharge alongside higher RMC would support an increase for October. PET prices are still well below pre-COVID levels, and these increases will help narrow the delta between RMC and price.

60/90 Days: After the October increase is in effect, prices should resume the steady climb to pre-COVID levels. Buy as needed.
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