Market Insights – Week of May 25, 2015

May 25, 2015 • Posted in Market Insights

Energy and the Economy

  • Oil prices were almost flat vs. last week. Strong demand due to better-than-expected economic growth as well as global uncertainty driven by Syria and Iraq are offsetting the impact of continuing global oil inventory growth. Oil is still forecasted to weaken in June and July with remaining potential for WTI (West Texas Intermediate) crude dropping to just over $50/bbl
  • Flooding in the Texas/Louisiana petrochemical grid caused by torrential rains (10 inches in 12 hours in some areas) could cause spot outages in the coming week. Even without production facility outages, flooded rail yards and access to inventories could cause shipment delays
  • Foreign Direct Investment (FDI) is a key contributor to the U.S. manufacturing revival. Foreign-owned companies invested $236 billion in the U.S. in 2013, up 35 percent from the previous year. Manufacturing remains a major category of FDI, totaling more than $95 billion in 2013, with chemicals, food production and machinery leading the way

Ethylene and Polyethylene

  • May NT contract price is now forecasted at 36 cpp
  • The Williams Geismar facility went down last week after a lightning strike and will be off line for about a week. The Evangeline pipeline still offline until mid-June so Louisiana spot ethylene remains high
  • Spot PE prices were stable last week with snug supply. May demand remains strong though not at the record levels seen in March and April. May demand suggests the pending May price increase will succeed
  • Export sales demand remains high despite port congestion
  • LLDPE is in tight supply ahead of NOVA’s planned outage in Alberta
  • North American delivered prices for blow molding grades are running at 7 cpp over China prices which indicates it may to be difficult to push PE prices much higher

Propylene and Polypropylene

  • Spot propylene monomer markets were quiet this week. Propylene inventory levels remain at a five year high
  • May monomer settlement was down 1 cpp. June monomer is now forecasted to move down 2 cpp. Previous forecast was an increase of 1 cpp
  • Pinnacle remains under the force majeure declare on May 11. Reports indicate the damage may be less severe than originally indicated but there is no update on returning to normal status
  • LBI announced a 3 cpp polypropylene increase above the change in monomer movement for June
  • Some converters are reported to be telling customers they are unable to supply all product needs due to the shortage of resin

Styrene and Styrenic Polymers

  • Spot benzene fell to $2.40/USG at week’s end
  • Evangeline pipeline and Williams Geismar cracker outages are reportedly affecting the supply of ethylene to styrene monomer plants in Louisiana
  • High feedstock costs and lackluster demand have narrowed production margins to below breakeven for polystyrene producers across Asia, prompting most producers to cut operating rates, market sources told Platts. Production margins for Asian PS producers have mostly fallen to below breakeven levels since early March, following a supply-driven surge in feedstock styrene monomer prices, Platts calculations showed. As of May 20, margins for general purpose polystyrene and high impact polystyrene were both $10/MT below breakeven, based on the latest weekly assessments of GPPS and HIPS markers at $1,510/MT CFR China and $1,550/MT CFR China, respectively. (More detail can be found in the article posted in this Blog’s Industry News section)

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