Welcoming 2018 with a look back at highlights from 2017
Oil prices traded in the range of $45-55/bbl on NYMEX in the first nine months of 2017 before they started to firm up in October due to supply concerns. Crude oil futures mostly maintained a bullish run in the last quarter of the year while hitting their highest levels since June 2015 in the last week of December.
Meanwhile, Brent futures were mostly on a firming trend in the June-December period of the year, with prices recently hitting their highest levels since May 2015.
On November 30, OPEC and non-OPEC members unanimously agreed to prolong oil production cuts until the end of 2018 in attempt to reduce supply glut.
Naphtha prices both in Asia and Europe followed a softening trend in the first quarter of 2017 while they steadily increased in the second half. According to ChemOrbis Price Wizard, both regions’ naphtha markets have recently hit their highest levels since the end of 2014.
Meanwhile, spot ethylene prices in Asia have been following a bullish trend since July amidst availability issues and have been trading above China’s import LDPE and LLDPE markets for more than four months, according to ChemOrbis Price Index.
New ethylene/PE capacities
Many petrochemical producers in several countries including China, India, Iran and the US either expanded their production capacities or launched new plants for ethylene and/or PE in 2017.
In the US, Chevron Phillips began the startup process of its new PE units at Old Ocean, Texas in September. Each PE unit is able to produce around 500,000 tons/year of PE. The company’s new 1.5 million tons/year cracker also begun the commissioning activities in December.
DowDuPont Materials Science started up its new integrated ethylene plant and its upgraded PE unit named ELITE in Freeport, Texas in September. The company’s ethylene plant has a production capacity of 1.5 million tons/year while ELITE is expected to produce 400,000 tons/year of PE.
ExxonMobil launched the first of its two new PE lines, located in Mont Belvieu, Texas, in October. The company’s new PE units are able to produce 650,000/ton of PE each.
India’s Reliance Industries Limited also started up its new 1 million tons/year PE plant, located in Jamnagar, India at the end of September. Players particularly in China reported competitive PE offers for Indian origin in the last quarter while they also showed up sporadically in Turkey and Southeast Asia.
Although the new capacities have already caused some oversupply concerns across the globe, plans for new projects do not seem to lose momentum for the years between 2020 and 2025 across the board. Iran, in particular, speeded up its plans to develop new petchem units in 2017 in partnership with several foreign funds.
China-Iran bank issues cause HDPE prices to spike
In May, many traders in China reported that they were facing difficulties in securing petrochemical goods from Iran since China’s banks started to impose some restrictions on opening letters of credit for transactions with Iranian parties.
Iran, as the main HDPE supplier of China, lost a considerable market share given these payment issues. According to data from ChemOrbis Import Statistics, China’s total HDPE imports from Iran decreased by around 7.2% year on year in the January-November period. Meanwhile, Saudi Arabia recuperated Iran’s loss as it raised its market share considerably by around 37% in the same timeframe.
As a result of reduced supplies from Iran, China’s import HDPE market mostly followed a bullish trend in the second half of 2017, with prices hitting a more-than-2-year high in late November.
Members of Gulf Cooperation Council (GCC) including Saudi Arabia, Bahrain, and the United Arab Emirates cut their diplomatic relations with Qatar in early June, which generated economic and supply concerns throughout June. However, these concerns happened to be short-lived as Muntajat continued to meet their customers’ requirements through alternative logistics arrangements which included re-routing their shipments through other ports.
India’s implementation of GST
In most of the second half of 2017, India’s polymer demand was negatively affected by the government’s implementation of GST (Goods and Services Tax) which was put into force as of July 1 as an indirect tax on manufacture, sale and consumption of goods as well as services.
On a global scale, the new tax in India affected PVC the most among other polymers given the country’s position as the world’s largest importer of PVC. Demand from India was persistently slow for months as the market sentiment failed to improve even after the monsoon season due to uncertainties over the GST implementation.
In November, the Indian government decided to revise the tax rates down and boost consumption to increase consumer goods and the retail sector, the media reported.
A series of devastating hurricanes, including Harvey and Irma, hit the US in September, causing more than $202 billion in damage, according to estimates by Bloomberg. Most petrochemical producers based in the US Gulf Coast were forced to shut their plants given the major storms and a large part of production was suspended in the region. The impact of Harvey-driven shutdowns was felt considerably across the globe as supplies from the US reduced significantly at that time. Spot ethylene prices in the US, for instance, hit a seven-month high in mid-September amidst reduced supply levels while regional polymer producers had to cut their export allocations and lift their offers.
Record-high imports in China and Turkey
ChemOrbis Import Statistics reveal that China’s and Turkey’s imports of polymers made in January-November already surpassed the previous years while the full data for 2017 is likely to hit new record highs with more than 18 million tons in China and 5 million tons in Turkey.
PET prices amid safeguard measures
PET prices climbed to more-than-two-year high both in Asia and Europe during 2017 although increasing measures on PET imports across the globe changed the trade routes of PET. Indonesia, Japan, Canada and the US were among the countries that applied new duties or started antidumping investigations on several Asian origins, particularly on China, last year. However, the European Union terminated the 13-year-long antidumping measures on China’s PET in early 2017, which triggered questions of whether Europe will be the new destination for this origin particularly in the absence of M&G, which filed for bankruptcy, and the problematic issues with JBF.
Swiss Clariant AG and the US based Huntsman Corp have mutually abandoned their merger plans while Brazil’s Braskem denied the takeover talks with LyondellBasell in November. Dow Chemical Co and DuPont finalized their planned merger on September 1 to form DowDuPont.
Petronas and Saudi Aramco re-united in RAPID project, which includes a refinery, a cracker and a downstream chemical complex with a production capacity of 7.7 million tons/year to be commenced in 2019. Aramco also said that their plans for IPO remained on course for 2018 despite the widespread speculations that emerged in the latter part of the year.
Saudi Aramco, meanwhile, acquired the full shares of the US’ largest oil refinery, Port Arthur in July while they company signed a memorandum of understanding with SABIC in November to develop a fully integrated crude oil to chemicals (COTC) complex by 2025, which is marked as the first time the two oil giants of Saudi Arabia had entered into a strategic partnership.
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