Houston —
US OLEFINS
The US propylene market enters the week eyeing July contract talk, with expectations of a 2- to 3-cent decrease from June, sources said. The possible drop in July contract prices is tied to weaker spot prices compared with June, sources said, adding that recent increases in monomer prices have weakened downstream demand. Spot pricing continued to see strength last week on supply tightness. In the ethylene market, participants are still awaiting news of the start of on-spec production from ExxonMobil’s 1.5 million mt/year Baytown, Texas, steam cracker — which was expected by the end of the summer — as well as the startup of Indorama’s Lake Charles, Louisiana, 440,000 mt/year cracker, by the end of the third quarter. Spot ethylene pricing saw support last week from feedstock ethane prices that remain at levels not reached since 2014.
US PVC
US export polyvinyl chloride prices this week were expected to remain stable as producers look for fresh offers for August volumes in Asia, which could influence August pricing talks in the US later this month. Trading activity in Asia was quiet last week as market participants stepped back ahead of August pricing talks, which were expected to result in rollovers of July pricing levels. Some Asian sources said those expectations could change, however, amid escalating trade tensions between China and the US. Turkey last week imposed anti-dumping duties on US PVC and disallowed volumes that arrive to be re-exported, which traders said essentially cut off what was the No. 5 market for US-origin PVC in 2017. China has imposed anti-dumping duties on US PVC, but allows volumes to be re-exported upon arrival. This week, the US is expected to impose $16 billion in tariffs on Chinese goods, and China has said it would respond with the same amount of tariffs on a variety of US output that includes PVC, ethylene dichloride, low-density polyethylene, crude oil and gasoline. China has not disclosed a date for those retaliatory tariffs, but market participants expect implementation to immediately follow the US’ official action. China is the top market for US export EDC with more than a 27% share, and a source said other Asian markets likely cannot absorb all those volumes.
US POLYETHYLENE
Export polyethylene market participants were monitoring buying in China tied to a seasonal slowdown and potential tariffs to gauge the impact it could have on US prices and availability. Multiple sources said the arbitrage for high density grades that had been open to Asia appeared to be closing, with prices in the region assessed stable to lower week on week. Some uncertainty surrounding potential Chinese tariffs on US resin also caused some to take pause, though initial announcements by the government centered around low-density grades. In the domestic market, producers are attempting to implement a 3-cent price increase in July that initially was announced for March. After June contracts were assessed flat, multiple producers reaffirmed the increase in customer communications obtained by S&P Global Platts. Domestic market participants have suggested the increase has a small chance to go through because of strong domestic demand and perceived tightness for some grades due to limited spot volumes. Others described the increases as unwarranted, pointing to inventory builds in recent months, with some describing the increases as a hurricane premium.
US POLYPROPYLENE
US polypropylene market participants are closely monitoring feedstock contract talks, with growing expectations that a reduction in polymer grade propylene prices would bring some relief to a market that has seen demand slow on significant price increases. Sources have suggested July propylene contract prices could decrease by 2-3 cents/lb, which would likely be passed on to polypropylene buyers as a number of contracts in the US remain on a monomer-plus basis. There were some expectations that short selling could become more prevalent, particularly as expectations for a monomer decrease continue to strengthen, sources said. The spot market has been tight and elevated pricing has continued to keep the US on the sidelines as far as exports are concerned, but current domestic pricing has made the US a more attractive option for imports, sources have said, and there are expectations resin from Asia and other locations could soon begin finding its way into the market.
US BENZENE
Without the support of crude or an unplanned supply disruption, benzene pricing is expected to remain near current levels, sources say. Any upward movement in US spot benzene pricing will hinge on the crude complex as the US benzene market appears well supplied after significant import volumes arrived in June, sources say. Sources estimated June imports to be near 135,000 mt. Meanwhile, downstream styrene demand appears to be tapering off following talk of a handful of parcels moving to Europe and the Far East early last week. Those opportunities may have dried up following a rollover in the laycan, which pushed the FOB Korea market down $32.50 to $1,346/mt and the CFR China marker down $34 to $1,383/mt.
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US TOLUENE & MX
Sources say toluene and mixed xylene may continue to be driven by fluctuations in energy, unless there are significant demand drivers from other chemical segments or regions. Sources said last week there was demand interest coming from Mexico for toluene and mixed xylene because of low inventory. Sources added that demand interest may continue into late July, which could provide some support for mixed xylene and toluene should production remain low in Mexico. Mixed xylene participants are still keeping watch on the downstream paraxylene market, which is expected to see production rates pick up in late July and/or early August. Toluene prices ended slightly lower last week because of weak energy futures. In addition to direction from energy futures, sources have said the toluene market may also look to the benzene market, which did not see significant price movement last week.
LATIN POLYMERS
Polyethylene and polypropylene buyers in key Latin American import markets are expecting pressure on pricing this week, likely keeping buying interest low, sources say. Along South America’s Pacific Coast, polyethylene importers will be looking for signs of further reductions in US export pricing and sustained improvements in availability, sources say. Buy-side interest has been soft in the wake of ongoing trade tensions between the US and China, with South America anticipating additional volumes as a result of less trade between the two global powers. Traders, meanwhile, could feel the pressure to close polyethylene deals and have been seen by some as “desperate” due to the falling offer levels. Similar sentiment has been heard in Brazil, with some buyers likely to turn to the import market this week after local producer Braskem raised polyethylene and PP domestic pricing last week, sources said. On the PP import front, South American importers enter the week with expectations of softer pricing due to weak demand in Asia, as an uptick in availability and on-the-water cargoes has been seen recently, sources said.
LATIN AROMATICS
Markets will be watching closely for news of Pemex’s Minatitlan refinery returning to full operations this week and its potential impact on the production of toluene and mixed xylene, sources said. Pemex is planning to restart Minatitlan following a feedstock-related shutdown that opened the window for unplanned maintenance work, a company source said last week, adding that any delays could lead to additional imports of toluene and mixed xylene. In Brazil, market players will be eyeing the local currency with the idea that stability against the US dollar could open the door for more economically advantageous imports, sources said.
Source: S&P Global Platts
