Trade participants said the US propylene market will remain under downward pricing pressure as domestic inventory levels have reached yearly high, based on last week’s inventory report from the Energy Information Administration. The build in inventory comes as all three US propane dehydrogenation units continue to operate heading into December. Meanwhile, the US November ethylene contract is expected to settle this week. Some trade participants were targeting expectations of a rollover for the November ethylene contract earlier this month but as cash costs have come down in late November, trade sources have said they expect the November contract to come down by 2 cents from the October contract price of 31.25 cents/lb.
US benzene prices were expected to remain under pressure in the near term, with December spot values hovering near in the low 200 cents/gal level as supply length persisted and derivative demand remained subdued. Sources pointed to stronger run rates at the refinery as well as robust output from toluene conversion units in September and October as drivers behind market length. Additionally, pending ad valorum taxes were expected to result in destocking in December. Downstream demand from the styrene segment was expected to improve with the restart of CosMar’s styrene production at Carville, Louisiana. Toluene prices were expected to remain near the low 220s cents/gal as demand was expected to remain under pressure from softer demand from toluene conversion units. Participants noted that expectations of a lower November paraxylene contract, coupled with sharp declines in the benzene contract, would dent MSTDP margins and subsequently limit demand for toluene as a feedstock. Mixed xylenes were expected to see flat to lower pricing in the near term as current spot levels limited arbitrage opportunities to Asia and reformate pricing added further downward pressure.
Latin mixed xylene will continue to downtrend, tracking the US market where the spot price is pressured by declines in paraxylene pricing, as per market feedback. Expectations of a lower paraxylene and lower toluene in the US have pushed mixed xylenes down, having a direct impact on the Latin aromatics pricing, sources said.
US export polyvinyl chloride prices were expected to settle this week after two producers nominated levels last week. One nominated pricing up $20/mt and another up $40/mt from November levels. Those nominations, if accepted, would put prices in the $770-$780/mt FAS Houston and $800-$825/mt FAS Houston, respectively, range. Market sources were skeptical that anything above a rollover of November pricing would be accepted, given continued soft demand in key global markets such as Africa and the Middle East. Export volumes availability was also expected to be limited this month as Shintech wraps up a six-week, complex-wide turnaround at its Plaquemine, Louisiana, operations and OxyChem looks to complete its ongoing 10-day turnaround at its Pasadena, Texas, complex.
With the global olefins market changing, having access to information on the key drivers behind feedstock and derivative price trends is crucial. Click the link below to see how Platts Olefinscan can meet your business needs.
Trade participants have said that with feedstock propylene prices coming down and inventory building, polypropylene producers may start offering material for export. However, US PP producers are still looking to increase prices by 3 cents/lb in December. Most of the producers said the increase in PP prices would be in addition to any change to the December PGP contract price. Trade sources have said there was still no clarity or overall sentiment that December PP price increases would be accepted.
Spot import buyers in Mercosur have entered December with ideas of steep discounts on polyethylene from the US and polypropylene from Asia, with soft demand in both the regions putting strong downward pressure to close out last month. Buyers are avoiding cargoes arriving in H2 December due to seasonal industry slowdowns and logistical limitations, keeping some on-the-water cargoes out of play on many deals, regardless of discount, sources said. With lower prices expected for Q1 2019 in light of bearish feedstock markets and a weakening energy complex, many PP and PE buyers are preparing to spend December practicing the same hand-to-mouth inventory strategy employed during the first two months of the quarter. Local producer Braskem is lowering prices on PE by Real200-400/mt (around $52-$104/mt) to begin December, with a company analyst pointing to the weaker global PE market as a primary driver. The Brazilian company has not yet determined a PP pricing strategy for December, with some sources expecting discounts comparable to those offered by the company to PE buyers.
Source: S&P Global Platts