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Petrochemicals

AFPM 2016: From Latin American polymers to US methanol, toluene, MX and more

Polymers | Petrochemicals | Energy Transition | Commodities

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AFPM 2016: From Latin American polymers to US methanol, toluene, MX and more

Platts' US petrochemical markets team was at the American Fuel and Petrochemical Manufacturers' annual meeting in Dallas earlier this week, where they met with industry leaders, speakers, market participants and more about what the petchem markets are experiencing — and expecting — in 2016.

The editors filed dozens of stories, including one about the possibility of more restructuring and consolidation in the industry and another looking at various challenges facing the industry.

To give a bit more insight into wide range of products and topics that were discussed at AFPM, we wanted to share a few more stories to come out of the conference.

Brazil's demand for polymers can improve by midyear: sources

Market participants believe Brazil's political turmoil can stabilize by July, leading to strong demand for polymers, sources said on the sidelines of the American Fuel and Petrochemical Manufacturers' annual meeting in Dallas.

Brazil has been rocked by a major corruption scandal at state-owned Petrobras. The turmoil has included names such as the current and former president of Brazil, multiple congressmen and other officials, Petrobras, which is looking to shed assets, is Braskem's main provider of feedstock naphtha, which the petrochemical company uses in the production of  basic petrochemicals, polyethylene, polypropylene and other polymers.

As Brazil is a key part of the Mercosur region and South America, the political outcome will impact other countries in Latin America, sources said.

"The minute Brazil is back on track, Argentina, Uruguay and even Venezuela will be impacted as well. The demand in Brazil for consumption goods exists and we need to be ready when it happens," a trader that sells resins to Latin America said Sunday.

With Brazil's economy struggling, demand has been talked weak for months due to a combination of factors. A palpable increase in late/delinquent payments and instability of the US dollar against Brazilian currency were some factors hindering trade, sources said.

"Buyers are cautious since last year and we believe their inventories are very low. By July 2016, this is likely to change depending on the political situation," the trader said.

A Brazil-based distributor also said it depends on Brazil's political stability.

"People are afraid to make debts and consumption is a short-term way to  growth. So, if the political scenario changes, the consumption might increase  as well," the distributor said. "But I think July is still too early to see any changes in the economic side."

— Ingrid Furtado

US methanol market monitoring projects, China: sources

The status of planned methanol facilities in the US Gulf Coast and Pacific Northwest and the state of the market in China have attracted the focus of US market participants, sources said Sunday on the sidelines of the American Fuel and Petrochemical Manufacturers' annual conference in Dallas.

US methanol capacity expanded to 5.75 million mt/year at the start of the year, up from 2.25 million mt/year at the start of 2015. The amount could exceed 15 million mt/year by 2020, based on projects announced by companies.

Sources said they did not expect all planned units to come to fruition, but the expansion in US methanol will continue to some extent, they said. Methanol pricing in China has also attracted attention, recently providing reason for optimism, sources said.

"There seems to be more comfort in the market with pricing in China higher and pricing in the US appearing to come off a recent floor," a trading source said.

Chinese spot methanol pricing reached a 2016 high at $230/mt CFR China on Friday, the highest since reaching that same level December 7, according  to Platts data.

The increase in pricing in China has been driven by increased demand from methanol-to-olefins units due to recently improved economics on stronger olefins and downstream pricing, sources in that region said.

US spot pricing reached 47.75-48.25 cents/gal FOB USG for March and April, recently off a two-month high after spending February in a range of 42-45 cents/gal FOB USG, Platts data showed.

The recent tightness in shipping space has been a factor within the market, with material that typically entered the US from Trinidad and Tobago and Venezuela seeking new homes as well as firm interest from China in importing US methanol.

The expansions in US methanol production have been targeted for the US Gulf Coast and the Pacific Northwest.

Projects in the US Gulf Coast include Natgasoline (1.75 million mt/year in 2017), South Louisiana Methanol (1.8 million mt/year in 2017), Yuhuang Chemical (1.8 million mt/year in 2018) and G2X Energy's Big Lake Fuels (1.4 million mt/year).

The Pacific Northwest has seen plans for methanol projects. Northwest Innovation Works has announced plans for plant in Kalama, Washington (3.5 million mt/year in 2019); Clatskanie, Oregon (3.5 million mt/year in 2020); and Tacoma, Washington (7 million mt/year at a date to be determined).

The US Gulf Coast has other planned methanol projects slated for the next two years. G2X Energy's 1.4 million mt/year Big Lake Fuels secured engineering contracts and should required three years of construction, the company said Tuesday. Other projects include Natgasoline (1.75 million mt/year in 2017), South Louisiana Methanol (1.8 million mt/year in 2017) and Yuhuang Chemical (1.8 million mt/year in 2018).

— Justin Schneewind

US toluene, MX sentiment remains bullish despite blending lag: sources

US participants were still bullish on toluene and mixed xylene spot markets despite a lag in gasoline blending demand, sources said on the sidelines of the American Fuel and Petrochemical Manufacturers' annual meeting in Dallas.

Both markets were anticipated to see upward pressure as early as February, as those markets saw in 2015, but the incline in gasoline blending demand has been slower because of higher gasoline inventories, sources said.

US toluene and mixed xylene spot inventories have remained ample as market players stored product in preparation for demand ahead of the driving season. However, for those looking to buy product for the second half of April, product was tougher to come by, a couple of sources said.

"Although we've seen this lag, the demand will be there as we close in on the driving season," a source said.

US spot toluene was assessed Monday at $2.03/gal ($617/mt) FOB US Gulf Coast, while US spot mixed xylene was assessed at $1.96/gal ($594/mt) FOB USG.

— John Calton