Weekly Market Drivers for the USA
March 1st increase letters are in place by the majority of the resin suppliers. Suppliers are expected to test the potential increase chances early March with price increases in the off grade and export prices.
Naphtha: Naphtha prices are below $300/mt. Upcoming planned ethylene maintenance shutdowns may decouple naphtha from oil as ethylene inventories are reduced through July. The cost to produce PE pellets is about $0.40/lb in SEA.
Ethylene: Ethylene supplies continue to remain healthy. Ethylene prices have no short term impact on the NA polyethylene price. The cost to produce ethylene is below $0.09/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, April, and May. Increases in oil need to be near $40/bbl for a $0.05/lb price increase or decrease to $25/bbl to achieve additional decreases. Expect suppliers to aggressively drive for price increases. Prime resin buyers should consider end of month resin shipments vs. early March. Off grade buyers should cover needs sooner than later in month. This is a recommended strategy until the next increase is implemented.
In the PP market, February PGP contract prices settle down $0.015/lb to $0.30/lb.
Dow’s PDH unit is running good product. Metathesis is incentivized to run, and heavy feeds remain advantaged or competitive with ethane.
Refinery Rates: US rates were up from 86.1% to 88.3%. PADD3 increased from 84.7% to 87.8%.
Planned and unplanned outages keeping rates low.
Propylene Inventory: Decreased from 3.198 million barrels to 3.139.
PGP: Spot PGP was traded at $0.27/lb and is currently offered at $0.27/lb.
RTi PP Outlook and Suggested Action Strategies
30 Days: Current spot monomer values indicate another small decrease for March PGP contract prices. PP prices look to be flat to down for March with margin expansion unlikely for most. 60/90 Days: Current indicators point to flat to down prices in this timeframe, however, downside potential is limited.
In the PVC market, ethylene spot moved fractionally higher as the PVC supply chain is running strong in advance of maintenance, yielding no support for an increase attempt at this time.
Supply & Demand
Supply: Operating rates are expected stronger in Feb. Maintenance is scheduled for late Q1 early Q2, with added PVC capacity showing in Q2/Q3.
Demand: Although home builders remain positive on an improved market for 2016, sentiment fell 3 points in the Wells Fargo survey. Export demand and pricing could increase if higher priced oil were achieved.
Chlorine: Spot prices have been flat since the start of Feb.
Ethylene: Ethylene supplies continue to remain healthy. The cost to produce ethylene is below $0.09/lb.
RTi PVC Outlook and Suggested Action Strategies
30 Days: Pricing discussions should push to flat this month on low ethylene and export pricing to offset producers’ arguments about upcoming maintenance outages. Supplies are strong & demand seasonally weak. The market is flat. 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, post-Lunar New Year markets still quiet, anti-dumping duties final decision looms.
Paraxylene: Toluene routes to PX are slowly improving with declining gasoline values and increased supplies.
PTA: Spot market is quiet. US contract prices for February are waiting for PX settlement.
MEG: February contracts assessed at down $0.0163/lb from January. Arbitrage to Europe and Asia could open.
RTi PET Outlook and Suggested Action Strategies
30 Days: Asian demand is likely to pick up. We could see some minor upward price movement as the increased demand takes effect, but should still remain at relatively low levels when compared to 2015 prices. 60/90 Days: The raw material cost outlook shows a steady environment for the next couple months. The main thing to keep an eye on is how early PET buyers are willing to stock up before the higher demand summer season.
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