Americas: The week ahead in petrochemicals

AROMATICS: Prices were expected to remain soft this week as prices continue to track RBOB values.

Demand from the chemical segment was expected to remain muted despite improved spreads for xylenes. STDP economics were stronger on paper, with margins last estimated near $78/mt, although participants have noted that run rates remain low. Additionally, octane demand was expected to be soft as toluene's blend value has slipped to roughly 100 cents/gal. Supply-side conditions for both toluene and mixed xylenes were slated to improve with the restart of Citgo's Lake Charles production as well as talk of pending imports for both toluene and mixed xylenes. Paraxylene prices were likely to remain soft amid curtailed domestic production and a steady flow of imported material.

OLEFINS: Prices are expected to remain weak amid coronavirus pandemic concerns. US polymer-grade propylene fell to an 11-year low of 19.875 cents/lb Friday alongside weaker crude prices, sources said. Refinery-grade propylene was assessed at 10 cents/lb, the lowest level seen since S&P Global Platts began publishing an assessment in March 2002. Sources said that the pandemic and crude weakness have delayed March propylene contract price negotiations. However, one source was optimistic negotiations would firm up this week after "things calm down and we can properly assess the market for the month." US spot Mont Belvieu ethylene also fell to the lowest level on record at 10 cents/lb, according to Platts data. Spot Choctaw ethylene was last assessed at 9 cents/lb on Friday.

METHANOL: In the domestic methanol market, both distribution of volumes and demand are expected to remain relatively stable. This could limit the downside for prompt methanol prices, which last week weakened in line with front-month oil futures. Production hiccups at a facility heard midweek last week could also serve to keep prompt-month prices slightly above second-month values, depending on how long the production issues persist.

US VINYLS: US polyvinyl chloride producers were expected to announce offers for April export volumes this week as the industry grapples with demand uncertainties amid the pandemic. Asian producers last week announced offers that were down $50/mt from March and did not sell out of available volumes, prompting similar expectations for US offers this week. On Monday, authorities in India, the second-most populous nation in the world, placed much of the country under strict lockdown to stifle the spread of the outbreak, potentially siphoning PVC demand despite India's import needs in normal times. The global oil price crash stemming from sharp demand destruction and the Saudi-Russian price war has prompted oil majors to reduce capital spending, and Shell last week suspended construction of its $6 billion petrochemical complex in southwest Pennsylvania to reduce worker contact. However, the US Department of Homeland Security last week also identified the US chemical industry and its workers as critical infrastructure with a "special responsibility" to maintain work schedules and operations while following the Centers for Disease Control and Prevention workforce and customer protection guidance. PVC output was expected to be limited in April amid planned turnarounds, but coronavirus uncertainties have siphoned price strength from tight supply.

US POLYMERS: US spot polyethylene prices are expected to continue falling this week as market participants brace for a bearish week due to the coronavirus. Sources see high-density polyethylene and linear-low density polyethylene at 30 cents/lb rail car basis, with the possibility of prices dropping. Lower offers for exports by traders are being heard throughout the marketplace, sources said, as the coronavirus continues to control markets globally and expectations for the short-term market are down. However, low-density PE continues to be firm at 40 cents/lb rail car basis and is expected to stay there into the week ahead. US domestic contract pricing is expected to remain flat as the domestic market continues to be stable. US spot polypropylene is expected to remain stable as there continues to be limited spot availability during the heavy turnaround season and it is unlikely to change until polypropylene plants restart, sources said. However, with lower propylene prices, PGP fell to an 11-year low at 19.875 cents/lb Friday, according to Platts data, and one market source said the move could result in PP prices falling by 6 cents/lb. Processors are expected to curtail orders in April, the source said, in response to demand destruction caused by economic disruption from the pandemic.

LATIN POLYMERS: Latin American polymers are expected to fall this week due to the global impact of the pandemic. The ongoing collapse in oil prices is generating instability, especially for PP, especially when combined with the pandemic's impact on shipments from Asia and freight rates under negotiation for increases. In the Brazilian PE market, prices this week are expected to see $10/mt to $30/mt decreases in most grades, expect for LDPE, where the market is tight. The foreign exchange rate has seen extreme volatility, with the real reaching as high as 5.12/$ Monday, making room for hikes in the domestic market. PP is likely to be driven by Asian and Middle East movements instead of the US, with PP prices decreasing in Asia. On the West Coast of South America, spot import PE prices are expected to continue to be highly correlated to events in the US market this week, with decreases expected in HDPE and LLDPE. The LDPE market is expected to hold steady. PP is expected to see a battle for influence between Asia and the US, with Asia possibly a preferred market due to lower prices. In Mercosur, new spot pricing lists were expected for March bookings, but most prices remained unchanged. Distributors and traders from the region are saying some polymer grades are unavailable from local producers and they have no inventory to supply to the market. In Argentina, prices are not expected to change as the country is under quarantine until at least the beginning of April, putting the entire industry under pressure due to limited activity, logistics and internal demand.