Houston — US OLEFINS
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Prompt July ethylene prices moved higher over the week. The market closely watched the potential impact of Hurricane Barry, which has been minimal to the operations of the olefins plants. Market participants are still closely watching the timing of the return of the BASF-TOTAL cracker back to operations, as well as ethane prices. The July polymer-grade propylene contract rose over the week. Ongoing turnarounds at the propane dehydrogenation plant of Flint Hills Resources and BASF-TOTAL's cracker and metathesis unit will be the primary focus of the market participants. The market is watching the duration of those turnarounds, which will impact US propylene stocks, which dropped over the week.
US market participants were taking stock of recent production issues on the Gulf Coast and demand for the remainder of the month. Sources said heading into this week they were looking at any potential impact to olefins and polymer production following Hurricane Barry's impact on Louisiana over the weekend. US polypropylene participants continued to closely monitor feedstock polymer-grade propylene prices, which climbed to 39 cents/lb last Friday. Although PP inventory is sufficiently stocked, the PGP-PP spread serves as a baseline for spot transactions, meaning increases in the former influence the latter. If PGP rises again this week, PP is sure to follow even against modest demand.
Latin America will likely see stable to lower polyethylene pricing as market participants continued watching the US market, where domestic June contracts prices were down. Producers were said to have lowered pricing down by 3 cents from May in line with weak fundamentals such as low feedstock costs and ample supply. Pricing for July and August would likely come down further, with no further changes in the fundamentals, sources said. Latin American polypropylene market participants continued looking for directions from both the Asia and US markets, sources said. Market participants saw a $10/mt increase in the Asia PP market last week, although some market participants remained skeptical over how sustainable this increase will be. In the US, market participants have mixed market sentiment about pricing. Some anticipate pricing increases while others await a drop in prices for the the polymer-grade propylene feedstock.
US export polyvinyl chloride prices were expected to remain in a range of $800-$810/mt FAS Houston this week, which is the range where producers settled July pricing at a rollover to June levels. Market participants were awaiting announcements of fresh August offers in Asia, where sentiment has been moderating from expectations of higher prices to a rollover of July levels or possibly a decrease. Asian pricing is often seen as a bellwether to the direction of US pricing. US producers had sought higher July prices, but met sharp resistance from the market amid tepid international demand. Upstream, ethylene dichloride prices were expected to hover in the mid-$200s/mt as chlor-alkali producers raise rates to capture higher caustic soda prices, which is adding EDC supply.
The US benzene market was expected to remain backwardated as prompt availability was expected to remain snug. Supply-side conditions were expected to improve in August as imports arrive. Additionally, demand from downstream styrene should improve as the market tightens amid poor economics. Styrene prices were expected flat to higher as producers noted that there was little incentive to produce incremental tons amid higher benzene prices. Domestic benzene production was unlikely to improve in the near term as toluene conversion units were expected to see continued poor economics amid weaker paraxylene pricing. Paraxylene prices were expected to remain relatively steady, though sources suggested there was little indication the market would improve significantly in the coming weeks. This was poised to keep the US benzene market reliant on imports. As well, toluene demand was expected to remain confined to the gasoline blending segment as blend values remained strong and premiums to reformate were poor. Similar dynamics were seen in mixed xylenes where demand from paraxylene producers was expected to remain muted amid a narrow PX-MX spread.
While Gulf Coast MTBE values have firmed throughout the month on the back of gasoline futures, the week opened to softer quotes for NYMEX August RBOB. The relationship between the two values, seen last week at 8 cents, has been stable for multiple sessions, with thin activity in the Platts Market on Close assessment process to suggest a different level. While many participants in the petrochemicals market had braced themselves for the impact of Tropical Storm Barry in Louisiana, MTBE production in the US is concentrated in the Houston area.
-- Staff report, email@example.com
-- Edited by Derek Sands, firstname.lastname@example.org