Weekly Market Drivers for the USA

PE Drivers

According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, 2019 could be the first in ten years that resin pricing did not change through the first quarter. It is probable that the March price will remain unchanged from February after at least one major supplier delayed the March increase. All price increases will likely be deferred again.

Market Overview

Supplier Actions: At least one supplier delayed the March increase on Thursday. Earlier this week, several suppliers notified customers of their firm intent to implement this increase. It is very likely there will be a market-wide delay of the March increase to April by the end of today.

Secondary Market: Off-grade resin activity in March was reported as strong. Availability is good; however, prices are expected to move up from the March low. March pricing finished lower than February.

Export Markets: First quarter export volume remains at historic high levels. Buyers have received flat pricing for export in April. March activity increased in the second half of the month as oil prices climbed.

Inventories/Production/Demand: There are currently no reported unplanned shutdowns in PE production. LBI, Nova and CP Chem have ongoing planned shutdowns. Formosa has a planned shutdown in April. All are scheduled to last approximately three weeks. The next scheduled shutdown is Nova in September. Nearly 10% of the ethylene production is expected to down for maintenance in Q2.

Feedstocks

Crude Oil: Oil prices are still near four-month highs, with WTI even breaking the $60 mark earlier on Tuesday, as Saudi Arabia reaffirms its commitment to hold fast to its production cuts and hints that it is looking for at least $70/bbl.

Ethylene: More than 10% of the ethylene production is down for maintenance and prices remain near $0.15/lb. The cost to produce ethylene remains near $0.13/lb. The cost to make a PE pellet is near $0.30/lb from the integrated producer.

Naphtha: Prices increased $30/mt in March to $565/mt. Spot ethylene is trading near $0.45/lb in SEA.

International

Asia: High local inventories and imports in the region are not supporting increases pressured by high oil prices. Commodity PE prices are $0.50-0.52/lb.

Latin America: Initial April prices rolled over from March. There have not been any increases in prices this year. LLDPE BRC offers were near $0.40-0.42/lb FOB Houston from traders.

Europe: An increase of $0.03/lb in March was implemented, and April prices are expected flat. Prices in the region are now just above the four-year low. Oil price increases are pressuring ethylene costs higher.

PE Outlook and Suggested Action Strategies

30 Days: April prices should expect significant downward pressure. Sustained higher oil prices could maintain current March prices. China tariffs may also impact demand and exports if further delayed or an outcome is decided.

60/90 Days: Price increase attempts will dissolve. Oil price surges could be the only driver to prevent high inventories levels as the primary price driver through late Q2. However, record inventories without production disruptions should continue to prevent price increases over the next 90 days, and could add downward price pressure of as much as $0.03/lb.

PP Drivers

Total declares Force Majeure at LaPorte, TX PP Plant.

Market Overview

•   Total suspended production of their PP plant in LaPorte because of the ITC fire in Deer Park last week. We are hearing Total is close to restarting the unit.
•   P66 was also experiencing PP production issues resulting from their associated refinery.
•   There are likely some isolated delays for certain buyers, but these outages do not appear to be having a broad impact on the polypropylene market.
•   Days of Supply were at a healthy 37.6 days coming into March which provided plenty of cushion to handle these relatively small-scale outages.
•   Domestic demand was also running at a -4.8% growth rate compared to the 2018 average. We have heard some reports that March demand might be a little better, but most market indications suggest demand is still rather weak.
•   Secondary market material was still being made available at heavy discounts. It has certainly been a buyer’s market to start the year.

Feedstocks

•   Spot PGP traded multiple times at $0.32/lb for March.
•   Spot PGP for April is currently valued at $0.325/lb.
•   Spot RGP is valued at $0.20/lb to $0.21/lb. EIA propylene inventories went from 6.21 million/bbl to 6.07 million/bbl.
•   Refinery run rates are at 86.6% with TAR season in effect.
•   Both FHR and EPD PDH units have bobbled since restarting. EPD is back up and running. FHR is expected to be back up soon.

PP Outlook and Suggested Action Strategies

30 Days: We are not ruling out some additional downward movement on PGP, but the market appears very close to a floor. We are currently seeing April as flat, give or take a penny.

60/90 Days: The big question moving forward is whether demand shows up or not. So far, polypropylene demand has disappointed. Low prices have failed to attract enough demand to clear excess inventory. Warmer weather and seasonal demand could turn the tide.

PVC Drivers

With lower Asia PVC pricing, lower ethylene pricing, and fractionally lower export pricing, further movement for domestic PVC is stalled, with a total increase of $0.01- 0.02/lb across February/March the likely end result when negotiations are done.

Market Overview

•   RMC are expected to fall as much as $0.005/lb in March as lower spot ethane and ethylene prices prevail on ample supplies.
•   Housing starts suffered a YOY drop of nearly 10% in February with weather taking much of the blame as permits were down some 2%, a more reasonable indicator of some slowing in the housing market early in the year.
•   Price discussions continue as producers arguments for an increase are likely to lose support with higher production and reduced export demand forecast for March after seeing February inventories lowered 11% due to relatively strong exports despite port congestion. Several maintenance turnarounds are concluded as one will continue into next month.
•   Both supply (-3%) and demand (-6%) dropped in the short and harsh weather month of February (ACC). Export volume exceeded year-ago levels by 20% as production was lower, with op rates below 85%. Exports faced more challenges in March as port logistics were further impeded by the tank farm fire and lower demand interest and pricing in Asia.

Feedstocks

Chlorine: Spot prices remain steady, with bullish expectations as we approach the peak demand season from the water treatment sector.

Ethylene: Despite a fire at an EMC refinery and multiple planned TAR’s that will remove ~7% of product from the supply stream, spot ethylene prices didn’t react. A 7% supply reduction would typically send spot prices upwards, but the fact prices are falling is a testament to how oversupplied the market is.

International

Asia: Expectations of lower pricing after the China VAT cut has slowed demand this week, but will likely pick up after the cut goes into effect next week.

Europe: Market assessments were unchanged this week as many participants were seen awaiting the settlement of the April ethylene contract to dictate the PVC price direction in Europe.

PVC Outlook and Suggested Action Strategies

30 Days: Further price increases lost support with lower Asian pricing in April and expected gains in production for March. Efforts to move up $0.02/lb across February/March are under pressure for a lower result. The remaining $0.02/lb is not part of this month’s discussion.

60/90 Days: Supply will be well-balanced as maintenance is concluded, offset by softened demand growth globally. Feedstock cost pressure is not expected until May. Monitor the strength of the construction season/improved weather, along with export interest, and global ethylene from oil for price pressure as producers will revisit nominations.

PS Drivers

PS prices firm higher in March; April prices expected to follow.

Market Overview

•   Producers have leverage (feedstocks) and momentum. March and April PS prices will firm higher; May prices have a high degree of probability if PS seasonal demand ramps up and BZ prices escalate again.
•   Formula-based buyers could get a hefty increase in April, even above the pending $0.04/lb if BZ CP’s have a hefty jump. NA PS demand will ramp-up in the coming weeks, affording more support to PS producers price position.
•   The fires last week (EMC Refinery and tanker farm) is causing supply issues for aromatics. LBI reacted by declaring Force Majeure on both BZ and SM.
•   Anti-plastics sentiment is growing as NJ and Hawaii both try and usher into law our nations most aggressive bans on plastics and Styrofoam. Proposals are as follows:
⎯ NJ: Ban on all styrofoam beverage/food containers, plastics bags, and straws.
⎯ Hawaii: Ban all plastic virtually from fast-food and full-service restaurants.

Feedstocks

Benzene (BZ): Spot prices relaxed this week after an aggressive surge the prior week. The monthly average price gain is ~8%. Surging price factors are CO, low imports, tightening supply, and a demand pull. A stout sell-off of BZ in Asia sent NA BZ prices tumbling at the end of the week.

Ethylene: Despite a fire at an EMC refinery and multiple planned TAR’s that will remove ~7% of product from the supply stream, spot ethylene prices didn’t react. A 7% supply reduction would typically send spot prices upwards, but the fact prices are falling is a testament to how oversupplied the market is.

Crude Oil (CO): The March monthly price has a stout $3/bbl price gain. OPEC holding their production cuts and sanctions on Venezuelan oil are the catalyst for the price leap. A minus 10 in the rig count on the week could put upward pressure on CO prices.

Styrene Monomer (SM): Although the monthly average spot prices are up $0.02/lb in March, they are up $0.06/lb total in Q1. Based on this average, the March CP is projected to firm $0.03/lb to $0.05/lb. Supply is tight and exports are abundant. Butadiene (BD): The monthly average price is $0.02/lb higher, but spot prices did shed $0.02/lb this week. This decline supports a flat CP for April, but reports are surfacing of a plus $0.02/lb for April.

International

Asia: Although SM posted a mild price gain, PS prices did not follow. PS demand is pegged as stable.

Europe: Buyers are bracing for a potential triple-digit price increase, on par with SM prices. Demand is robust, in part because of pre-buying. PS producers, keen to this, closed their order books.

PS Outlook and Suggested Action Strategies

30 Days: Buy to cover April needs. The full $0.04/lb has a high degree of success.

60/90 Days: PS demand could keep pressure on prices even if BZ prices erode. May prices have the potential to move upwards. Be prepared to buy more in mid-April.

PET Drivers

March PET moves $0.01/lb upwards after the PX/PTA contracts settle higher.

Market Overview

•   RMC remains the primary PET price driver at this time as seasonal demand continues to be delayed and supplies are healthy.
•   WTI crude oil prices managed to retreat from the $60/bbl mark, staying close-by near $59/bbl for most of the week. OPEC production cuts, Venezuela sanctions, and lower domestic rig counts have contributed to a $3/bbl increase in monthly averages from February to March.
•   International PET markets are also witnessing the lackluster seasonal demand, which has prevented any notable price increases that are typical during this time of the year.

Feedstocks

Paraxylene (PX): Mixed xylene spot prices are on the rise after the fire from last week. March PX contracts settled at $0.55/lb, which is a $0.015/lb increase from February. Expectations of increased capacity in China is putting downward pressure on spot PX in Asia.

PTA: A PX contract increase of $0.015/lb put PTA contracts at up $0.01/lb, reaching $0.5504/lb. Reduced supply availability from PX could easily be mitigated by slower downstream demand. Forward outlooks show only a minimal increase potential heading into Q2.

MEG: A major domestic producer announced a $0.03/lb price increase for MEG contracts for April, as turnarounds had been keeping supply on the tighter side for most of March. However, facilities are returning to production, and the supply shortness will be short-lived. MEG inventories in China saw a minor weekly increase.

International

Asia: Seasonal demand has started to show some improvement this week, which managed to increase PET prices marginally, despite lower feedstock costs marginally. The upcoming revision to value-added tax rates (VAT) in China has been bolstering demand for PET domestically, with little material seen in the export market heading to the rest of Asia as a result.

Europe: Ample supplies amidst slower-than-usual seasonal demand has kept PET price assessments stable through most of March. Buying activity is still expected to arrive for the pre-buy season, but perhaps later than previous years.

PET Outlook and Suggested Action Strategies

30 Days: April feedstocks are looking flat-to-slightly higher. Expect formula pricing to follow the same flat-to-higher direction of feedstocks, while market pricing could go even further once we see seasonal demand finally start.

60/90 Days: There are little to no price decrease drivers on the horizon. Continue to try to secure resin sooner rather than later before the worst of the seasonal increase drivers hit in Q2 to Q3.