Americas petrochemicals outlook, w/c June 4

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US AROMATICS: US aromatics availability remained limited as prompt spot toluene prices continued to hover near the 300 cents/gal mark. Sources anticipated little change in near-term fundamentals and supply was expected to remain tight. Sources continued to point to the segment for demand as disproportionation economics that were sharply negative. TDP and MSTDP margins were last estimated near minus $131/mt and minus $35/mt, respectively. MSTDP margins were expected to face further downward pressure amid expectations of declines in the US spot price. Toluene’s blend value moved lower last week and was last estimated at near 267 cents/gal. demand was expected to continue to come from octane demand, sources said. Meanwhile, spot mixed xylene prices were under downward pressure as recent spec issues were heard resolved and availability was improving. Sources said that octane demand remained strong and this was supporting mixed xylene prices. Near-term expectations point to lower mixed xylene prices in Q3. Meanwhile, spot paraxylene prices were expected to move lower after an outage at led to prices disconnecting from Asia and talked as high as $1,030/mt FOB USG. Sources have said that those numbers should be returning to Asia minus levels soon. Spot paraxylene was last assessed at $980/mt FOB USG with further declines expected this week.

US OLEFINS: Propylene market participants enter the week keeping a close eye on rising spot polymer-grade propylene prices, which closed the previous week by trading at a five-month high of 61 cents/lb MtB pipe. US spot prompt PGP was assessed Friday at 60.75-61.25 cents/lb FD USG, up 9.25 cents/lb on the week and 1.25 cents/lb on the day. It was the first time that prompt PGP prices were above the 60 cent/lb level since January 26, according to S&P Global Platts data. The increase in spot prices was driven by concerns over possible production issues early in the week. Sources also noted strong demand from downstream polypropylene producers, with multiple market sources noting that units were running at stronger rates after production issues, including one that had resulted in a force majeure. Ethylene market participants will turn their attention to a potential two-month contract settlement after failing to reach a consensus in April. Expectations suggest the April contract would shed 1.5-2 cents/lb, with May falling an additional 1 cent, sources said. March ethylene contracts settled at 28.25 cents/lb for the net transaction price. Talks surrounding the settlement are expected to start this week, a source said. Prompt-month spot prices have climbed 30.3% from May 11, according to S&P Global Platts data, after hitting historical lows of 12 cents/lb FD USG on supply length. The prompt month was last assessed Friday at 15.375-15.875 cents/lb FD USG. While the market remains oversupplied, sources attributed the recent rise in pricing to climbing feedstock prices and strong downstream demand, particularly from the polyethylene sector.

US POLYMERS: US polyethylene market participants entered June monitoring production and inventory levels after May contracts were heard decreasing for some grades, particularly linear low-density. There were expectations that additional decreases could be in order in June, particularly if there are signs of a seasonal dip in domestic buying, which can happen during the summer months. However, there was some suggestion buying could remain relatively steady, with sources noting memories of Hurricane Harvey season could prompt converters to carry larger stocks into the 2018 season. While exports have been strong, aided by new capacity expansions, that has not necessarily been the case for traders, many of whom have said availability remains limited and at pricing levels above levels needed to compete in global markets. Polypropylene buyers were closely monitoring feedstock propylene prices, which saw spot prices move higher last week on the heels of a 5-cent increase in May contracts. Producers continue to push for margin expansions after adding a combined 3 cents/lb in April and May, however, another increase in June could prove difficult sources have said, particularly after prices were heard moving up by around 7 cents/lb last month. The potential impact of imports also were garnering attention from the market, with sources saying they expected some Asia-origin cargoes to reach the US in late June and .

LATIN POLYMERS: Buyers and traders in key South American markets will be eyeing the fallout from a 10-day independent truckers strike in Brazil that appeared to be resolved as of late last week, with particular attention being paid to fuel availability, highway logistics and the restocking of retail centers in Sao Paulo, sources said. The strike wreaked havoc on Brazilian logistics, especially in the industry-heavy state of Sao Paulo, with several distributors unable to move resins to customers or restock from importers or local producer Braskem, sources said, adding that their converter customers were also unable to move finished goods to consumer outlets, further clogging the retail chain. Braskem last week indicated it was running its Brazilian petrochemical plants at 50% due to the strike, and the company has yet to respond to requests for update. Import markets had felt fewer effects from the strike, but congestion could still arise due to a backlog of stored shipments, sources said. Should logistics and production begin to return to normal this week, the region could see pre-strike market movement resume by June’s end, sources have said.

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