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Weekly Market Drivers for the USA

by ChemOrbis Editorial Team - content@chemorbis.com
  • 15/02/2016 (18:21)
According to Resin Technology Incorporated’s (RTI) weekly market driver report for plastics processors, the February PE price may be the 2016 bottom after the $0.02- $0.03/lb price reductions conceded by suppliers this month.

Market Overview

Suppliers announced a $0.05/lb increase for March 1st. Based on the fundamental that February prices is the low price, an increase letter is needed to take advantage of any event without delay.

Steady oil prices near $30/bbl equates to an oil pellet cost to produce in the low $0.40’s. After the February and January price reductions, the narrow delta between the NA price and the cost to make an oil pellet price will help challenge imported finished products and allow the NA supplier to continue exporting incremental PE volume.

Off grade and secondary market activity is expected to accelerate as low end deals are done early in the month.

Feedstocks

Crude Oil: Naphtha prices remained in the low $300/ton as oil prices bounced all week. The Paris-based International Energy Agency (IEA) called the recent rise in prices a "false dawn," debunking some of the reasons given for the recovery: speculation about an OPEC production cut, hopes for higher demand, the prospect of a weaker dollar, and slowing U.S. production. The agency said it expects the global oil glut to grow even bigger throughout the year.

Ethane: Steady pricing coupled with low natural gas prices should continue. Cash cost to make ethylene from ethane is below $0.08/lb.

Ethylene: Ethylene supplies continue to remain healthy. Ethylene prices have no short term impact on the NA polyethylene price.

Latin America: Trader activity is very strong as prices near a bottom. North America suppliers have reacted to the Middle East offers and are selling LLDPE in the lower $0.40’s/lb.

RTi PE Outlook and Suggested Action Strategies 30/60/90 Days:

The price of oil will continue to be a leading price indicator. With the exception of oil/naphtha prices, there are no drivers present that suggest any price increase potential. With $30 oil and February price reductions the market will be stabilized heading into March and April, and May. Increases in oil need to be near $40/bbl for a price increase or decrease to $25/bbl to achieve additional decreases. Expect suppliers to aggressively drive for price increases.

In the PP market, supply and demand remain balanced.

Market Overview

Operating rates came in at 92.2% for January, slightly below the 2015 average of 92.7%.

PP exports dropped 45% in January. However, don’t let the percentage fool you. It is a big percentage derived from a small number. And is consistent with the trend over the past few months.

Polypropylene producers continue to push for implementation of the balance of their January price increases by the end of the quarter 1.

Hearing initial talks of contract PGP settling down $0.015/lb to $0.30/lb, but nothing official or market-wide just yet.

US polypropylene prices carry a $0.30/lb premium to prices in China. Inventory

Refinery Rates: PDH unit is running. Reports indicate that the unit is running close to rates.
Inventory:

Preliminary ACC data indicate that January demand was a little soft at 2.5% below the average monthly demand of 2015. Production was slightly higher than demand which increased inventory levels by 24 million pounds and days of supply from 32 to 32.7 days.

Propylene

PGP: Spot PGP is bid at $0.27/lb with little in the way of transactions.

RGP: Spot RGP trades at $0.1725/lb.

RTi PP Outlook and Suggested Action Strategies 30 Days:

February PGP will likely settle lower based on current spot numbers. The implied contract price for February would be $0.29/lb to $0.30/lb based on current spot values. 60/90 Days: Propylene monomer is feeling bearish and could continue to move lower. Polypropylene will face margin expansion attempts throughout Q1, but market dynamics could make further success difficult if demand struggles.

In the PVC market, ethylene spot steady based on unplanned ethylene outage as PVC inventories build and exports fall back, no support for increase.

Market Overview

With the Ethylene contract down nearly 4 cents since Nov, and trending flat for Feb. along with chlorine, there are no cost drivers for an increase.

Slow seasonal demand, and low export prices, producers have no basis for a January or February increase, but will be looking for one once maintenance starts later in March up and down the supply chain.

PVC raw material costs are down $0.02/lb since November with February expected flat.

PVC increase nominations may get partial traction down the road with potential tightening of the supply/demand balance driven by maintenance or a rise in export/construction season demand.

Export pricing will remain low under the pressure of current oil price levels.

Supply & Demand

Supply: Operating rates eased below 87% as production volume fell fractionally according to ACC data. Maintenance is scheduled for late Q1 early Q2 up and down the supply chain, with added PVC capacity starting to show in Q2.

Demand: January demand improved 5% domestically as export fell 9% according to ACC data on some indications of inventory building in advance of maintenance.

Feedstocks

Chlorine: Prices are flat, but have been slowly easing since December, down roughly 7% due to low winter demand.

Ethylene: Ethylene supplies continue to remain healthy. Ethylene prices have no short term impact on the NA polyethylene price. International

RTi PVC Outlook and Suggested Action Strategies 30 Days:

Pricing discussions should push to flat with a focus on continued low ethylene and export pricing to offset producers’ arguments about upcoming maintenance outages. Supplies are strong & demand seasonally weak. Flat market. 60/90 Days: Stocking in advance of outages has yet to generate upward price pressure depending on the timing of the uptick in construction demand. PVC output should improve over 2015 aided by increased capacity.

In the PET market, domestic spot pricing may be on the rise ahead of the summer bottling season.

Market Overview

While Asia has been quiet this past week with most market participants celebrating the Lunar New Year, domestic prices have started a slight rise. This is reasonable considering how low pricing became while feedstocks are reaching a price floor. When you’ve reached the bottom, the only place to go is up.

Crude oil has been making another downward move this week, currently below $27 per barrel. As a result, mixed xylene prices have been pulled down low enough that a potential arbitrage to Asia may have opened.

The final decision for the antidumping duties is expected at the end of the month and April. The outcome could affect import destinations for PET resin, after shifting to South Korea and Taiwan as a result of some of the initial decisions. Domestic demand is also likely to increase.

Feedstocks

Paraxylene: Toluene routes to PX are still economical at this point. Pricing could see some increases by months end due to an unplanned outage.

PTA: The PTA market in Asia has been quiet through the Lunar New Year. Domestic demand is stable.

MEG: Pricing has been mostly flat surrounding the Lunar New Year celebrations.

RTi PET Outlook and Suggested Action Strategies 30 Days:

Pricing has been mostly stable, with the outlook showing very modest increases for the rest of the month. Crude oil below $27 per barrel may help keep costs low, but it is too unpredictable to expect where it is likely to go. 60/90 Days: We should start to see upward movement through the rest of the first quarter. A lot is still dependent on crude oil, as well as the Asian market (taking in to consideration the effects of the Lunar New Year, upcoming bottling seasonal demand, and turnarounds.)
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