Argus DeWitt Polymers

Transcription

Issue 15-14 Friday 17 July 2015
Key Prices
Polymer markets, 15 Jul
US
Timing
Asia-Pacific
cfr CMP
spot current
Western Europe
¢/lb
Argus-adj $/t Timing
PP Raffia
Jul
$/t
€/t
$/t
1,616-1,687
1,475-1,540
1,150-1,180
1,565-1,630
PP Homo, GP IM
Jul
88.50-90.50
1,400-1,422 Jul
1,715-1,786
PP Copolymer
Jul
90.50-92.50
1,444-1,510 Jul
1,770-1,852
1,615-1,690
LDPE Liner Film
Jul
107.00-110.00
1,830-1,852 Jul
1,896-1,950
1,730-1,780
1,370-1,410
LLDPE Butene-1 Film
Jul
98.00-101.00
1,653-1,676 Jul
1,885-1,939
1,720-1,770
1,260-1,300
LLDPE Hexene-1 Film
Jul
102.00-105.00
1,676-1,698
LLDPE Octene -1 Film
Jul
103.00-106.00
1,698-1,720
HDPE Blow Mold HIC
Jul
107.00-110.00
1,676-1,698 Jul
1,791-1,846
1,635-1,685
1,270-1,330
HDPE Injection Mold
Jul
108.00-111.00
1,653-1,676 Jul
1,791-1,852
1,635-1,690
1,270-1,330
HDPE HMW Film
Jul
103.00-106.00
1,698-1,720 Jul
1,731-1,797
1,580-1,640
1,330-1,370
PVC Pipe
Jul
103.50-104.50
1,554-1,565 Jul
1,255-1,304
1,145-1,190
830-850
PS Crystal
Jul
146.00-158.00
2,789-2,811 Jul
2,257-2,290
2,060-2,090
1,340-1,360
PS High Impact
Jul
157.00-169.00
3,031-3,053 Jul
2,356-2,389
2,150-2,180
1,460-1,490
1,240-1,270
US ¢/lb and $/t values represent benchmark; posted values represent price movements only. US prices are delivered east of Rockies.
Economic news
China ex-works, 15 Jul
US/Canada
US building permits were up 7.4pc in June, while housing
starts rose 9.8pc
Builder confidence for newly built single-family homes in
July hit the highest level since November 2005.
May retail and food services sales were down 0.3pc from
April.
US economic indicators continue to show signs of mixed recovery, as an increase in June building permits and housing starts
was partially offset by lower retail and food services sales in
May compared with April.
Building permits in June were at a seasonally adjusted
Contents
Polyethylene
Polypropylene
Polystyrene
Polyvinyl chloride
Copyright © 2015 Argus Media Ltd
Yn/t
Import parity $/t
PP Raffia
8,300-8,600
1,060-1,099
PP Copolymer
8,900-9,300
1,137-1,189
HDPE HMW Film
10,600-10,800
1,357-1,383
LDPE Liner Flm
10,800-11,100
1,383-1,422
LLDPE Butene-1 Film
9,300-9,500
1,189-1,215
PVC Pipe
6,000-6,100
763-776
PS Crystal
10,400-11,300
1,331-1,448
PS High Impact
10,500-11,300
1,344-1,448
annual rate of 1.343mn, up 7.4pc from the revised May rate
and up 30pc from June 2014. June housing starts stood at a
seasonally adjusted annual rate of 1.174mn, up 9.8pc from May
and up 26.6pc from June 2014.
About Argus DeWitt
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6
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and market intelligence for the aromatics, olefins and related
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insight every day.
Economic news
Europe
Feedstocks fall as crude weakens.
Weak euro continues to drive eurozone trade surplus.
Auto industry see growth for 22nd consecutive month.
Oversupply in the crude market has been a constant source of
discussion over the last few months, but prices held broadly
steady at above $60/bl for North Sea Dated crude until the
start of July, when they eased to a $55-60/bl range. Opec
countries continue to increase crude production despite,
or because of, lower oil prices, while the likelihood of Iran
restarting oil exports is increasing after the signing of an
agreement on its nuclear programme. Downward pressure from
the demand side has come from concerns about the impact of
a possible Greek exit from the eurozone and a slowdown in the
Chinese economy after its stock market slumped.
While some in the polymers sector will welcome the downward pressure on feedstock costs, a period of fresh volatility in
upstream costs is likely. That will create more uncertainty and
could lead to some sharp fluctuations in demand as buyers adjust their purchasing strategies. As in the second half of 2014,
it will take some time for cheaper feedstocks to feed through
the chain and producers higher up will be the first to benefit.
Europe North Sea Dated vs naphtha
Naphtha CIF
120
860
103
720
86
580
69
440
52
300
Jul 14
Sep 14 Oct 14 Dec 14 Jan 15 Mar 15 Apr 15
Jun 15
$/bl NSD
NS DATED
1,000
$/t naphtha
The consumer price index for all urban consumers increased 0.3pc in June on a seasonally adjusted basis, according to the US Bureau of Labor Statistics. The increase was
broad-based with advances in the indexes for gasoline, shelter
and food.
Builder confidence for newly built single-family homes
in July hit a level of 60 on the National Association of Home
Builders/Wells Fargo Housing Market Index (HMI), while the
June reading was revised upward to 60 as well. The last time
the HMI reached that level was in November 2005. Any number
over 50 indicates that more builders view conditions as good
rather than poor.
May retail and food services sales were $442bn, down
0.3pc from April, but up 1.4pc from May 2014. Excluding automobiles, retail and food services sales were down 0.1pc from
April and up 0.1pc from one year earlier.
US manufacturing output was unchanged in June, while
output of motor vehicles and parts fell by 3.7pc from the prior
month, according to the Federal Reserve. Manufacturing in
June grew by 1.8pc from a year earlier.
Nymex crude futures settled lower on Thursday as the
market continued to consider the deal that paves the way for
Iran’s full return to the oil market. Nymex light, sweet crude
futures fell by 50¢/bl to $50.91/bl on 16 July. Ice Brent settled
higher by 46¢/bl to $57.51/bl. The Brent-WTI spread widened
by 96¢/bl to $6.60/bl.
Natural gas futures ended lower on 16 July at $2.854/
mmBtu, falling by 6.4¢/mmBtu after a US government report
showed a larger-than-expected increase in gas inventories. The
US Energy Information Administration (EIA) reported that gas
stockpiles grew in the week ended 10 July by 99 Bcf, topping
analyst estimates for an injection of 97 Bcf and exceeding the
five-year-average increase for the week of 71 Bcf.
35
Jul 15
European naphtha prices fell to their lowest since 5 February and are on average €45/t lower in July than June. The
naphtha crack spread fell as low as -$5.26 on 14 July, having
been in positive territory just over a month ago. Naphtha’s
premium to LPG has narrowed slightly but at more than 20pc
above both propane and butane, a change in feedstock choice
for petrochemical producers remains unlikely. Refinery margins
as a whole were boosted by the falling crude price to 10-year
highs and despite easing in recent days remain at levels that
will encourage high operating rates. Gasoline demand is driving higher refinery margins and the naphtha crack could come
under further pressure as a result of increased production.
The Greek debt crisis continues to rumble on but the fear
of contagion to other parts of the eurozone — which would
have the biggest impact for the polymers industry — has
Page 2 of 13
Economic news
receded despite the lack of a resolution. It has maintained
pressure on the euro-dollar exchange rate, which fell below
€1.09/$1 — its lowest level since April — as the European
Central Bank reiterated its commitment to the quantitative
easing programme that began in March. This will continue the
boost to European trade seen so far this year. The eurozone
trade in goods surplus rose by 27pc in May compared with a
year earlier to €18.8bn, as exports of goods to the rest of the
world increased. For January-May, eurozone exports were 5pc
higher than a year earlier, although that growth slowed slightly
in May to 3pc. Growth was higher than 5pc in food and drinks,
chemicals, machinery and vehicles, and other manufactured
goods, and was only offset by a fall in energy exports. Import
penetration was weak in comparison, at flat for May and up by
just 1pc in the January-May period.
The automotive industry remains strong. European new
passenger car registrations continued to rise in June, seeing
growth for the 22nd consecutive month. June saw the largest
month-on-month growth across the EU since December 2009
at 14.6pc. The major European markets continued to push the
trend, with Spain, France, Italy, Germany and the UK all posting double-digit growth at 23.5pc, 15pc, 14.4pc, 12.9pc and
12.9pc, respectively, compared with May. Registrations for the
first six months of this year rose by 8.2pc compared with the
same period of 2014, surpassing 7mn units.
Asia-Pacific
China
China's economy posted 7pc year-over-year growth in the second quarter. The growth rate beat a median market forecast
of 6.9pc for the second quarter. China’s second-quarter GDP
grew by 1.7pc over the previous quarter. The better than
expected growth follows the government's macroeconomic adjustments and adherence to structural reforms as the economy
plateaus. China's manufacturing activity remained stable in
June, with key indicators remaining in expansion territory.
Growth in China's consumer price index (CPI), a main gauge
of inflation, edged up to 1.4pc in June, slightly above market
forecasts of 1.3pc and the 1.2pc rise in May. Consumer prices
in June on a monthly basis remained unchanged, compared
with a dip of 0.2pc posted in May. The CPI for the first half of
the year edged up by 1.3pc year on year. The producer price
index, which measures wholesale inflation, slid in June by
4.8pc year on year and its 40th straight month of decline. The
Chinese government aims to keep its consumer inflation at
around 3pc for 2015.
The manufacturing purchasing managers' index (PMI), a key
measure of factory activity in China, posted a 50.2 reading in
June, unchanged from last month. A reading above 50 indicates expansion, with China's manufacturing PMI holding above
the expansion/contraction threshold for the past four months.
HSBC released its version of China's June manufacturing PMI at
a 49.4 reading, up from 49.2 in May. It was the fourth successive month that its figure was in contraction territory.
Indonesia
The economic slowdown in China hit Indonesia’s economy
hard. Exports are down nearly 13pc compared from last year,
with the central bank saying a 1pc fall in the growth of China’s
economy could translate to 0.4-0.6pc decline for Indonesia.
Domestic demand continues to soften amid the persistently
weak rupiah, still hovering above 13,300 to the US dollar, its
worst showing since the Asian financial crisis in 1998. Imports
fell nearly 18pc compared with a year earlier. The country’s
central bank maintained benchmark interest rates at 7.5pc
in June, now unchanged for the last four months, to improve
the country’s current account balance ahead of a potential increase in US interest rates. The trade balance recorded a seventh straight month of surplus, a trend unseen since at least
2013. President Joko Widodo is supporting industrialization efforts, as he seeks to shift the country away from consumption
to production and investment. The economy contracted by
0.18pc in the first quarter from the fourth, the second straight
quarter of contraction.
South Korea
An outbreak of the Mers respiratory virus hit South Korea’s
economy, as consumers avoid crowded areas. South Korea
posted a trade surplus for 41 straight months as imports fell at
a faster pace than exports. Revised figures show a June trade
surplus of $9.98bn, higher than the $6.27bn surplus in May.
Imports fell by 13.6pc from a year earlier to $36.7bn in June,
while exports slid by 2.4pc to $46.68bn. Shipments to China
and US, South Korea's top two trading partners, increased by
0.8pc and 6.9pc respectively, but shipments to the EU and
Latin American countries fell by 4.4pc and 20.3pc respectively.
Page 3 of 13
Polyethylene
US/Canada
July pricing is expected to settle unchanged; however
weakness is evident in the spot market.
June demand was the strongest so far this year.
Export demand is beginning to weaken due to lower international prices.
US polyethylene pricing for July is largely expected to settle
unchanged from June, as at least two US producers postponed
a 5¢/lb July increase until August. However, some buyers
are hoping for decline, arguing that spot prices fell by 3-4¢/
lb since June and export demand is weakening on declines in
international prices as well. The Argus-DeWitt preliminary midmonth assessment shows prices unchanged with June, but that
could change by the end of the month pending the conclusion
of contract negotiations.
Any price change will hinge on the strength of July demand. Total demand in June was stronger than expected,
rising by 7.3pc from May levels to the highest level of the
year, according to preliminary estimates from the ACC Plastics
Industry Statistics Group as compiled by Veris Consulting. The
share of export sales rose to 20.7pc during the month from
19.2pc in May. The largest increase came in the high density
polyethylene (HDPE) market, which saw sales increase by 11pc.
Sales of low density polyethylene (LDPE) rose by 5.7pc, while
sales of linear low density polyethylene (LLDPE) rose by 3.5pc
during the same period. Year-to-date sales are up by 5.8pc
versus the first half of 2014, with HDPE sales up 7.2pc, LLDPE
sales up 6pc and LDPE sales up 1.9pc from 2014 levels.
US polyethylene sales
2015
mn lb
2014
2013
3,700
3,500
3,300
3,100
2,900
2,700
Jan
Feb
Mar
Apr May Jun
Jul
Aug
Sep
Oct
Nov Dec
— ACC/Veris
Total June production fell 6.2pc from May. LDPE production fell by 1.6pc, LLDPE production fell by 18.2pc, and HDPE
production rose by 1.9pc. Year-to-date production is up by
4.7pc from the first half of 2014, led by a 7pc increase in HDPE
production.
As June sales outpaced production, producers drew down
inventories by 254mn lbs, more than erasing the 200mn lb gain
in May stockpiles. However, even with the drop, inventories
are still slightly above the 2014 average, creating a market that
is still relatively balanced, if not slightly long in grades such as
HDPE blow molding.
Buyers reported an increase in the amount of spot material
offered in the past few weeks, with price discounts of as much
as 3-4¢/lb from June contract prices. Off-grade HDPE blow
molding was offered at 59¢/lb, while wide-spec HDPE injection
was offered at 59-62¢/lb for domestic delivery.
July is typically a seasonally slow month for polyethylene,
as many processors take production time off around the Independence Day holiday. Also, buyers who likely purchased additional material in June in advance of proposed July increases
may stay out of the market in July. Final demand figures will
likely depend on how much US material is sold in the export
market.
Export demand continued to wane as international prices
extended losses, and buying interest from Europe declined.
LDPE was offered at 57¢/lb fob Houston for bagged material, with LLDPE and HDPE blow molding offered at 56¢/lb fob
Houston for bagged material.
Europe
The PE supply-demand balance remains ‘snug’.
Market cautious ahead of possible price reduction in August.
Many producers and converters look for stability in July
price negotiations.
The PE market is cautious going into the second half of July
as although the supply situation has improved it is still fragile.
The window for a summer slowdown is shrinking, with at least
one supplier announcing an order stop in early July and others
reporting continued good demand. Consumers are for the moment relieved to be able to source the volumes that they order, but will be looking for lower prices if supply continues to
improve and will gain confidence from lower feedstock prices.
July is typically the holiday period in the Nordic region
and northern Europe followed by southern Europe in August.
As yet there is little evidence of a demand reduction in July,
with producers seeing good order intake and forward forecasts
for August are positive. At the same time, a fall in crude and
Page 4 of 13
Polyethylene
naphtha pricing and an improvement in ethylene availability, with crackers returning from unplanned shutdowns, are
leading to expectations of lower prices in August. For many
there is little scope to reduce stock but traders and distributors have been active in the spot market ensuring that their
warehouses are empty for the end of the month. At the same
time the anticipation of a fall in price is unlikely to encourage many to book imports in the coming weeks. The market
remains tightly balanced and vulnerable to further production
issues and it seems unlikely that imported material will fill any
potential gap in the near term.
EU15 net PE trade
NA
SA
’000t
C&EE
Africa
ME
FE
Net
150
75
0
-75
-150
-225
Jul 14
Sep 14
Nov 14
Jan 15
Mar 15
May 15
— Eurostat
The May PE trade figures from Eurostat show a sharp
decline in net exports. This is a continuation of a trend from
October as improved demand in western Europe and supply issues has encouraged producers to focus on their core
customers. The main driver of the reduction in net imports
is HDPE, with gross imports so far this year at the lowest level
since 2008, on an annualised basis. The continuing fall in LDPE
net trade is also a significant contributor to the overall trend.
LLDPE imports from the Middle East — the main source — have
continued to fall, with 2015 being on average 17pc below 2014,
which was itself 38pc down from 2013. The structural need
for European converters to attract imported PE may well be a
limiting factor in any price reductions we see over the coming
months.
Many buyers and sellers will be content to see stability in
July contract price negotiations. Buyers can see that supply is improving but not to a degree that will put any serious
pressure on the negotiations, and having absorbed month-onmonth price increases some stability is welcome. Producers
have started the month targeting a price increase and will
have enforced this with those needing to settle early. But as
the month progresses and there is more talk of a decrease in
the ethylene contract price, this will become more difficult to
achieve.
Asia-Pacific
Import prices dropped on falling upstream and weak demand.
China’s domestic values softened with weaker LLDPE futures amid its low season.
Non-integrated PE margins improved slightly but remain
negative.
The import PE market in China has fallen from last week
with falling upstream and weak demand. Linear low-density
polyethylene (LLDPE) futures fell, which also weighed on
trading sentiment. An agreement on Iran’s nuclear program on
Tuesday led to further volatility in energy prices. The eventual
lifting of economic sanctions on Iran could increase the flow
of petrochemicals to other areas instead of China. But Chinese
market participants are more wary of falling crude prices
instead of reduced supplies. LDPE is trading at $1,370-1,410/t,
while LLDPE fell to $1,260-1,300/t. High-density polyethylene
(HDPE) film fell to 1,330-1,370/t on a cfr China basis. Demand remains at low levels amid a summer lull and may only
rebound in late August. The outlook for PE is still weak for
July and August. Inventories from converters and trading firms
remain low and some restocking is possible. Import supplies
are still ample. Middle East producers are now offering more
cargoes into China because of soft domestic demand with the
Islamic fasting month of Ramadan. Demand in the Middle East
domestic market may recover with the end of Ramadan around
mid-July.
Asia non-integrated PE cash margin
$/t
Non-integrated PE cash margin right
LLDPE left
HDPE left
LDPE left
1,750
375
1,600
250
1,450
125
1,300
0
1,150
-125
1,000
Jan 14
Page 5 of 13
Apr 14
Jul 14
Oct 14
Jan 15
Apr 15
-250
Jul 15
Polyethylene
The domestic market is slightly weaker, with prices down
by 200-300 yuan/t. Sinopec and PetroChina lowered offers
this week. PetroChina Daqing’s PE units totaling 1.12mn t/yr
are shut and are expected to restart in late July. Yanchang
& China Coal’s two 600,000 t/yr PE production lines are also
down for unscheduled maintenance that is expected to last
until late July. Pucheng Clean Energy’s 300,000 t/yr PE unit is
shut down for one week. Chinese domestic HDPE film traded
at Yn10,600-10,800/t ($1,372-1,398) this week. LLDPE fell to
Yn9,300-9,500/t ($1,202-1,228) with LDPE at Yn10,800-11,100
($1,398-1,438). Domestic LDPE and HDPE were at a premium
Outages
Shutdown
Plant
KTA
Duration
PetroChina Daqing
LLD/HD
550
20Mar-Jul
PetroChina Daqing
LLD
60
20Mar-Jul
PetroChina Daqing
HD
240
mid-Jun, 1 month
PetroChina Daqing
LD
265
mid-Jun, 1 month
Yanchang China Coal
LLD
300
midJun, unknown
Yanchang China Coal
HD
300
midJun, unknown
Sinopec Shanghai
HD
250
20Jun, 1 month
Shanghai Golden Phillips
HD
135
17Jun-23Jun
Mitsubishi Chem
PE
280
20May-endJun
Mitsui Prime
PE
245
20Jun-20Jul
Evolue Chiba
LLD/HD
300
20Jun-20Jul
Huajin Tongda
HD
300
25Jun, 1 month
Chandra Asri
PE
320
2Jun-17Jun
Lotte Titan Malaysia
HD
115
8Jun-22Jun
Chandra Asri
PE
320
endAug, 90 days
Pucheng Clean energy
LLD/HD
300
14Jul-22Jul
of $28-35/t to imports. Domestic LLDPE is $65/t lower than
imports.
Southeast Asian polyethylene (PE) prices fell despite quick
declines in ethylene. Discussions and transactions remained
subdued as Indonesia, the biggest polymer consumer in
southeast Asia, saw participants out during the final week
of Ramadan and as they prepare for Eid celebrations. Prices
of film-grade HDPE inched down to about $1,340-1,370/t on
cfr basis this week from $1,340-1,390/t last week. LLDPE also
dropped by about $50/t to about $1,300-1,320/t cfr southeast
Asia this week. LDPE edged down about $20/t to $1,380-1,400/
t cfr southeast Asia.
Falling ethylene prices help improve margins for PE producers. HDPE and LLDPE margins for non-integrated plants in
southeast Asia have widened to -$3/t and -$20/t this week,
respectively, from -$69/t and -$100/t. LDPE prices remain firm
relative to HDPE, while LLDPE has the best margins at about
$15/t, and up from -$50 last week. Lotte Titan, with 450,000
t/yr PE capacity, raised operating rates to about 60pc in July,
after mostly operating at about 40pc since late March. The
company bought a cargo of ethylene on a formula basis for
August requirement, allowing it to increase operating rates
to about 70pc. Chandra Asri is also currently operating its PE
plant at 100pc to build buffer stocks ahead of a 90-day turnaround starting at the end of August.
Ethylene prices in northeast Asia continued to fall on a
combination of weaker demand from downstream sectors and
volatility in crude and China’s futures markets. PE margins
for non-integrated plants improved to -$69/t last week from
-$178/t two weeks ago on a weighted average basis.
Polypropylene
US/Canada
Polypropylene demand remains strong, as June sales
marked the strongest month so far this year.
Producers continue to seek additional margin expansion in
July and August.
Supply remains tight due to turnarounds and allocations.
US polypropylene contracts for July remain unsettled, even as
July contracts for polymer grade propylene (PGP) settled 3.5¢/
lb lower. On top of any change in monomer costs, many US PP
producers announced additional margin expansion increases
of between 4-5¢/lb over the July-August timeframe. It is not
clear yet how much of that will be implemented in July. The
Argus-DeWitt preliminary mid-month assessment shows a drop
of 3.5¢/lb to reflect the fall in monomer costs. That could
change by the end of the month as the results of margin increase negotiations become clearer.
Demand for polypropylene remains strong, with total sales
in June up 0.7pc from May to the highest level of the year,
according to the ACC Plastics Industry Statistics Group as
compiled by Veris Consulting. Year-to-date sales through June
Page 6 of 13
Polypropylene
are up 6.19pc from the same period in 2014, while year-to-date
export sales are down 5.1pc from 2014, even as US prices are
more globally competitive.
NA polypropylene sales
2015
mn lb
2014
2013
1,550
1,450
1,350
1,250
1,150
1,050
Jan
Feb
Mar
Apr May Jun
Jul
Aug
Sep
Oct
Nov Dec
— ACC/Veris
Production in June was down 1.3pc from May, with producers drawing down inventories by another 50mn lbs during the
month. Operating rates rose to around 94pc of capacity, a rate
which many consider unsustainable due to the age of the units.
Supplies remain very tight. At least one unit is down for
planned turnaround in July, and additional turnarounds are
scheduled in August. A major producer remains on sales allocation through September. One Texas producer reported maintenance this week related to an upset at a partner facility, but
for now there appears to be minimal impact to PP production.
Spot availability remains limited, and prices for generic
prime and off-grade material carry a 15-20¢/lb premium to
contract prices. Wide-spec homopolymer PP was offered at 6264¢/lb during the week. With continued weakness in propylene, prices could ease slightly, but for now lower prices have
not materialized.
Producers continue to push for margin expansion in an
effort to raise prices to reinvestment levels so new capacity
can be built. Most producers announced a 3¢/lb increase in
June, followed by an additional 4-5¢/lb increase in either July
or August. Some producers indicated these July and August
announcements are an effort to implement price increases
they were unable to fully implement in June. As a result, price
clarity may not emerge until August.
Europe
PP supply continues to improve, putting pressure on prices.
Upstream monomer plants slowly returning, but supply
remains fragile.
Demand slowing as buyers eye falling prices and more supply.
The European PP market remains balanced-to-tight today,
but the balance is expected to continue to improve. Supply is
increasing as upstream monomer plants are gradually returning to normal production and, combined with a sharp drop in
crude prices, this is buoying buyers’ expectations of a significant price drop in August. Demand is also easing on a combination of improving supply confidence, the falling crude price
and summer holiday slowdowns.
For PP producers and buyers, the restart of several crackers, including the second-largest in Europe in the Netherlands
after nine months off line, is a welcome development. For now
the feeling of tightness has mostly disappeared from the market, although it remains in some grades and regions, particularly random copolymer. This has contributed to a wide range
of settlements so far in July. Freely negotiated prices remain
at a significant premium to C3-linked contract prices. and will
be under the most pressure. Some producers started targeting
a July decrease in line with the €20/t fall on the monomer, but
expect on average to reduce prices by €30-40/t by the end of
the month.
For buyers, the improved supply environment is providing
alternative supply options that will help their negotiating position. Producers that have been most affected by supply problems will be keen to make the most of opportunities as they
return, but will be wary of flooding the market with material
or committing themselves while monomer supply remains
fragile. Stock levels are low but where there is inventory there
is incentive for producers and traders to try and shift stock to
avoid an August devaluation. This is also true of convertors and
their customers. Demand in May and June was strong in part
as customers over-ordered to try and build a buffer against the
tight availability. As confidence in supply improves, this demand is likely to dissipate as everyone moves back to hand-tomouth ordering, and where stocks have been built up slightly
this is allowing some flexibility for downstream customers to
delay orders. This is helped by the typical summer slowdown
when many convertors and their customers typically close
down for several weeks. It helps explain why some producers
have reported their slowest July order intake for 12 months,
although this may also be due to other producers returning to
the market and reclaiming market share.
While the focus is on the improving balance, it may pay
to maintain an element of caution going forward. Several upstream issues have not yet been resolved. One German cracker
Page 7 of 13
Polypropylene
is still off line after a fire in May, and crackers in France and
Germany are still operating at low rates. The shutdown of
a large refinery in Germany has tightened supply for C3. A
French cracker will shut down permanently later in the year
and the future of an Italian cracker remains uncertain, while
a large non-polymer propylene consumption unit could restart
after more than a year off line. As such the market remains
fragile and could still be vulnerable to new issues, which given
the recent history may not be unexpected.
Asia-Pacific
China’s PP market weakened with commodity futures amid
its low season.
Chinese domestic prices also dropped with rising inventories from Sinopec and PetroChina.
Margins are still in positive territory but slightly weaker
compared with June.
Chinese PP saw steep falls in commodity futures, in response
to lower crude futures and weaker market sentiment, which
weighed on prices amid its low demand season. Middle East
producers are now offering more cargoes into China because
of soft domestic demand amid the Islamic fasting month of
Ramadan. Demand in the Middle East domestic market may
recover with the end of Ramadan around mid-July. Transaction prices dropped by $30/t for the homo-polymer grade
and down by $10/t for co-polymers. Propane dehydrogenation
(PDH) producer Yangzijiang Petrochemical has since early last
week started selling its new PP products in east China. The
producer achieved on-specification PP production from its new
400,000 t/yr unit in mid-June. Manufacturing activity in the
downstream woven bags, home appliances and pipe industries
remain slow amid the weak demand season over June-July.
Asia homo PP non-integrated cash margin
Homo PP cash margin right
Homopolymer left
$/t
Copolymer left
1,700
500
1,540
375
1,380
250
1,220
125
1,060
900
Jan 14
0
Apr 14
Jul 14
Oct 14
Jan 15
Apr 15
-125
Jul 15
The market outlook remains generally weak. But inventories
from converters and trading firms remain low with some restocking possible.
The Chinese PP market continued to soften this week.
Sinopec and PetroChina ex-refinery offers fell last week and
remain stable this week. Continuing shutdowns, including
Shenhua Ningmei’s 500,000 t/yr plant, Yanchang & China
Coal’s 600,000 t/yr plant, Oriental Yangzijiang’s 400,000 t/yr
and Xuzhou Haitian’s 270,000 t/yr plants, did little to support prices. Chinese domestic prompt homo-polymer cargoes
traded at 8,300-8,600 yuan/t ($1,072-1,111) this week. Copolymers are moving down to Yn8,900-9,300/t ($1,150-1,202).
Domestic prices fell $74-79/t behind import prices, which may
drag down import prices further. PP powder prices in Shandong province, where the majority of independent refineries
are located, were stable at Yn8,000/t ex-warehouse, supporting domestic propylene prices at Yn7,150-7,200/t ex-tank in
Shandong province. A minimum cash cost of about Yn600-800/t
is required to breakeven. Chinese PDH plants, except the continuing shutdown at Oriental Yangzijiang’s 600,000 t/yr unit
from 4 July until the end of July, are running at high rates at
about 90-110pc this week. The week’s average PDH operating
rates climbed to 79pc from last week’s 74pc, as Ningbo Haiyue
raised run rates to near capacity this week after completing
maintenance in early July.
Homo-PP prices in southeast Asia fell by $20 to about
$1,230-1,260/t this week, with co-polymer PP edging down to
about $1310-1,320/t, despite steeper declines in propylene.
Outages
Shutdown
Plant
KTA
Duration
Daqing Petchem
Daqing Petchem
PP
300
24Mar-H2Jul
PP
400
21Jun-20Jul
Dushanzi PC
PP
690
10Apr-12Jun
Dalian WEPEC
PP
100
15Apr-5Jun
Huajin Chem
PP
250
23Jun-22Jul
Sumitomo Chem
PP
300
20Jun-20Jul
SABIC Tianjin
PP
450
24Jun-29Jun
Shenhua Ningmei
PP
500
29Jun, 40 days
Formosa
PP
170
27Jul-5Aug
Formosa
PP
180
27Jun-6Jul
Yanchang & China Coal PP
600
15Jun-earlyJul
Shanghai Petchem
PP
200
lateJun-1Jul
JG Summit
PP
190
endJul-earlyAug
Qinzhou PC
PP
200
7Jul-15Jul
Sinopec Shanghai
PP
200
16Jul-1Aug
Page 8 of 13
Polypropylene
Demand is still generally weak, with discussions remained
muted with the upcoming Eid celebrations. Major PP units in
the region are operating smoothly. Chandra Asri’s 480,000 t/yr
PP unit is operating at 100pc after the company ordered seven
vessels of propylene delivered this month. Polytama Propindo’s
180,000 t/yr PP unit is also operating at 100pc. Thailand’s IRPC
is expected to have planned maintenance at one of its two PP
lines with total production capacity of 475,000 t/yr in August.
Philippine producer JG Summit is also expected to have a four-
day planned maintenance at its 190,000 t/yr PP line at the end
of July.
Northeast Asian propylene prices remained weak amid
abundant supplies for August delivery, while buying is subdued. Non-integrated PP producers in Asia earned more in the
past two weeks, with cash margins rising to $140-150/t for
homo-PP from a previous $120-130/t because of lower feedstock propylene prices, but this is still narrower compared
with average margins at $200/t in May.
Polystyrene
US polystyrene sales
US/Canada
July polystyrene prices are up by 6¢/lb on average.
August pricing is uncertain, as benzene spot prices weaken
slightly.
Supply and demand remain generally in balance.
US polystyrene contracts for July are expected to increase
by 6¢/lb on average due to higher benzene costs. Initially
producers nominated increases of 6-8¢/lb, based on the 80¢/
USG rise in the July benzene contract, which settled at 305¢/
USG. However, producers in several cases were heard meeting
the more competitive 6¢/lb increase offered. As a result, the
Argus-DeWitt preliminary mid-month assessment shows a 6¢/
lb increase, but that could change at the end of the month if
some contracts are settled higher.
With benzene spot prices falling below 280¢/USG during
the week, polystyrene pricing in August is uncertain. Producers may aim to hold onto July price gains in August, even if
benzene contracts settle lower, in an effort to reduce recent
volatility that saw prices rise in May, fall in June and rise again
in July.
Demand in June rose by 7.6pc from May levels, with yearto-date sales up 0.5pc versus 2014 levels, according to the ACC
Plastics Industry Statistics Group as compiled by Veris Consulting. June production fell by 4.5pc from May levels, with yearto-date production up by 0.3pc from 2014 levels. Operating
rates held fairly steady around 80pc. July demand is expected
to be similar to June, as seasonal demand outweighs the
higher costs. Producers drew down inventory levels by around
15mn lb in June. But even with the drop, inventories are still
slightly ahead of the 2014 average.
Supply and demand remain fairly balanced, with no major
production outages apart from a styrene force majeure in
2015
mn lb
2014
2013
430
410
390
370
350
330
Jan
Feb
Mar
Apr May Jun
Jul
Aug
Sep
Oct
Nov Dec
— ACC/Veris
Canada and delayed deliveries in some areas due to a tight
supply of railcars.
The spot market for polystyrene was fairly active in early
July, with buyers reporting more offers than normal as producers managed inventory. Spot prices rose on average by around
5¢/lb so far during July with wide-spec high impact polystyrene (HIPS) offered around 77-78¢/lb. HIPS was generally more
available than general purpose polystyrene (GPPS).
Europe
Prices falling in line with monomer.
July demand slips owing to holidays and lower price expectations.
Producers expect August demand upturn.
Contract prices are falling in July, as was widely expected,
amid slowing demand and ample supply. Some producers started the month announcing price reductions of €65/t, slightly
less than the €85/t monomer reduction, but as the month has
progressed settlements have tended towards the monomer and
Page 9 of 13
Polystyrene
some buyers are targeting up to a €100/t decrease by the end
of the month. Despite the increase in the butadiene July contract price by €85/t the differential of HPPS to GPPS remains
at an average of €90/t. With a producer returning from a
planned shutdown buyers have ample supply and are using this
to leverage better pricing.
Demand from convertors has slowed in July, compared with
June, owing to the start of the holiday season, particularly in
northern parts of Europe. Even so, producers are still seeing
reasonable order intake. The fall in contract prices has not
been enough to support incremental tactical buying as convertors see little reason to restock yet. It is still early for firm
projections, but many expect another drop in prices in August.
Styrene monomer prices have seen some short-term support in
the spot market because of production issues in North America
that could limit imports to Europe, but it is not yet clear if this
will lead to a significant impact, and downward pressure on
prices is expected from benzene and ethylene.
Prices could hit a floor in August and producers expect
this to support higher than normal August demand. Convertors expect their demand to remain slow in August owing to
the continuing holidays, but they will need to restock ahead
of the busier autumn period and before maintenance at two
styrene monomer production sites in northern European during
September.
Underlying demand is steady. The latest EU estimates have
seasonally adjusted production in the construction industry
0.3pc higher in May than in April in the eurozone, but the April
figure was itself revised down to a 0.2pc drop having previously been forecast at a 0.3pc rise. For the EU 28, the index
fell by 0.3pc in May, following on from a 0.5pc drop in April.
Asia-Pacific
PS market continued to fall following upstream markets,
but at a slower pace.
Chinese PS fell because household producers have completed production before summer.
The general purpose polystyrene (GPPS) import market
remained weak, while high-impact polystyrene (HIPS) held
steady. Styrene monomer (SM) fell for three straight weeks to
$1,260/t on a cfr China basis. But SM prices are steadier this
week, indicated they may have bottomed. GPPS prices fell to
$1,340-1,360/t, while HIPS dropped slightly to $1,460-1,490/t.
PS demand remained weak and sentiment was further pressured by upstream declines. Demand for household appliances
rose from April and fell again in July. Converters finished major
production before the peak sales season for air conditioners
and refrigerators. Current PS orders remain low. Margins remained at a breakeven because of low PS prices. The outlook
for PS is still weak because of a softer upstream and an overall
weak economy but the decline is slowing.
PS prices in China’s domestic market remained low. Trading levels continued to fall by 200-250 yuan/t from two weeks
ago trends upstream. Consumers restocked some cargoes for
seasonal orders in May and June but deals are rare for now.
Chinese domestic GPPS prices traded at Yn10,400-11,300/t
($1,346-1,464/t), with HIPS at Yn10,500-11,300/t ($1,359-1,464/
t). Domestic GPPS is trading $43/t higher than imports, while
domestic HIPS is falling $88/t behind.
Asia GPPS non-integrated cash margin
GPPS cash margin right
GPPS cfr China left
$/t
HIPS cfr China left
2,000
400
1,800
300
1,600
200
1,400
100
1,200
0
1,000
Jan 14
Apr 14
Jul 14
Oct 14
Jan 15
Apr 15
-100
Jul 15
Polyvinyl chloride
US/Canada
Producers are seeking a 2¢/lb July price hike.
Export prices continue to fall with international prices.
June export sales were the highest so far this year.
US polyvinyl chloride (PVC) producers continue to seek a 2¢/
lb July price increase after agreeing to settle June contracts
unchanged from May. Securing a price increase may be difficult, however, due to weak domestic demand and falling
Page 10 of 13
Polyvinyl chloride
international prices. The Argus DeWitt preliminary mid-month
assessment for July is unchanged from June as contracts are
not finalized, but that could change by the end of the month.
Producers sought higher margins across the chlorovinyls
chain for much of the year due to low prices in the caustic
soda market, which produces by-product chlorine. Recent
efforts to raise caustic soda prices were unsuccessful, which
is putting more pressure on producers to raise PVC prices. So
far in 2015, PVC prices are up 3¢/lb from January levels, after
producers successfully implemented a 3¢/lb increase in March.
However, prices are 2¢/lb lower than June 2014 levels.
Demand in June rose by 1.4pc from May, but is down
more than 5pc from June 2014, according to the ACC Plastics
Industry Statistics Group as compiled by Veris Consulting. June
export sales rose by 6pc from May to the highest level so far in
2015 but are down 15pc from June 2014. Exports represented
33pc of sales during the month, up slightly from the average
31pc of sales for all of 2014. Year-to-date sales through June
are virtually flat with 2014 levels.
US PVC sales
mn lb
2015
2014
2013
1,425
1,350
1,275
1,200
1,125
1,050
Jan
Feb Mar
Apr May Jun
Jul
Aug Sep
Oct Nov Dec
— ACC/Veris
June production fell by 3.4pc from May, with year-to-date
production down by 0.8pc. Producers drew down inventories
by 18mn lbs in June, as sales outpaced production. Some of
the loss of production can be attributed to upstream production problems at a La Porte, Texas vinyl chloride monomer
(VCM) plant in June. Those issues resulted in reduced export
volumes in July.
The market continues to benefit from strong demand from
the construction sector. Building permits in June rose by 7.4pc
from the revised May rate, and are up 30pc from June 2014.
Housing starts in June were up 9.8pc from May and up 26.6pc
from June 2014. Improved housing starts and building permits
offer the promise of upcoming demand for PVC, which is used
in pipes, windows, siding, and a number of other applications
related to residential construction.
Export prices continued to weaken slightly, as US producers
reacted to additional declines in Asian pricing. Volumes from
US producers were limited, with US material offered around
$750/t fas. That price is becoming less attractive to global
buyers, who are buying only as needed. Traders suggested
prices may rebound in August, when demand typically returns
in several markets.
Europe
PVC producers lift force majeures as crackers restart.
Producers target an increase for July but consumers dispute
the justification.
Demand remains reasonable but falling feedstock prices
could cut order entry in the second half of the month.
PVC supply has been improving gradually through July as upstream cracker issues have been resolved. Two force majeure
events in Germany that have been in place since May and June
— linked to ethylene supply problems — have now been lifted,
and supply is improving at a French plant impacted by upstream cracker issues. The improvement in supply will be welcome to consumers who in places have had to cut production
and turn away orders. But it marks a potential turning point
as it coincides with a likely seasonal reduction in demand —
albeit less marked than in recent years — and a fall in crude
prices, which will put pressure on ethylene prices in August.
Demand has been robust in the first half of July with good
levels of order entry as converters still under supply constraint
have needed to buy for immediate use. Most have low stock
levels after months of supply problems and will want to build
some buffer into a strained supply chain. This is likely to be
limited by an expectation of lower prices in August. It is not
unusual for converters to be low on stock at this end of the
season and before summer shutdowns, so not all will feel the
need to restock to any significant degree. Experience has
demonstrated that when all producers are running, prices and
margins are likely to come under pressure in the second half of
the year. It remains to be seen if the restructuring of producers or the small improvement in underlying demand will be
enough to make this year different.
The May figures from Eurostat demonstrate the supply
problems over the last few months. VCM imports to the EU
increased notably compared with year-earlier levels as produc-
Page 11 of 13
Polyvinyl chloride
ers sought to mitigate upstream ethylene supply issues. At
the same time there has been a marked decrease of net PVC
trade with both a reduction of imports and exports. European
producers have been withdrawing from the export market to
focus on supplying their local customers as the supply-demand
balance has tightened.
EU15 net PVC trade, Sep 14-May 15
NA
SA
Africa
ME
’000t
Asia
C&EE
Asia-Pacific
Net
35
0
-35
-70
-105
-140
Sep 14
Nov 14
Jan 15
Mar 15
May 15
— Eurostat
EU15 net PVC trade, 2004-15
NA
SA
Africa
’000t
ME
Asia
C&EE
Net
350
0
-350
-700
-1,050
-1,400
2004
2006
2008
2010
2012
2014
— Eurostat
This is a marked reversal of the longer term trend. Since
2008 with the European market in recession, producers have
increasingly been developing export opportunities, with
Turkey, the Middle East and central and eastern Europe being
the main destinations. Some argue that the proximity of these
markets to the EU makes exports to these destinations akin
to domestic sales, but the recent reduction of sales reflects
that they may not be regarded as core by all producers. These
figures reflect less than half of 2015 so it remains to be seen if
this pattern is continued into the second half of the year.
Producers have started the month targeting a July contract
price increase of €20/t, another increase above monomer.
Producers feel this is justified based on the supply and demand
balance. The consumer perspective is that supply is improving
and that producer margins have increased more than enough
over the last months. At the moment, the prices we quote are
as of the end of June and we will adjust them to reflect the
conclusion of the July negotiation in our next report.
Formosa lowered July offers with falling overall demand in
Asia.
Pipe orders in India remained at low levels with the monsoon season.
Chinese export prices dropped but were less competitive
compared with Taiwanese supplies.
Taiwan’s Formosa continued to lower its July benchmark offer
to $860/t, down $20/t from last month, due to weak demand
in India and China. Summer is the low season for pipe orders.
Actual transaction prices may be adjusted according to the
volume. Trading volumes remain steady. US-origin cargoes are
being offered at $820-830/t cfr China, with steady volumes
and deals done at $790-810/t. South Korean and Japanese
producers followed suit and lowered their offers to $840/t.
Chinese domestic PVC prices softened because of a weaker
upstream and falling import cargoes. Ethylene-based PVC supplies are trading 200 yuan/t lower at Yn6,000-6,100/t ($771784/t). Carbide-based PVC also fell to Yn5,800-5,900/t ($745758/t). The gap between domestic PVC and import values
remains at $62-89/t. Export offers for ethylene-based PVC have
also fallen to $800-830/t fob China, while carbide PVC dropped
to $800-820/t. Trading volumes are limited since this level is
not competitive with Formosa’s offer.
Indian demand for PVC slowed with the arrival of the
monsoon season. Domestic converters with ample inventories
remain at lower operating rates. Imported PVC traded lower
at $840-890/t cif India. Domestic prices fell to $1,000/t levels.
While the gap is narrowing with northeast Asian supplies, domestic buyers prefer domestic supplies. Demand in India also
weakened because of the monsoon season. Southeast Asian
PVC prices continued to fell to $810-840/t cfr southeast Asia
amid its monsoon season. Indonesian PVC producer Asahimas
has reduced operating rates at its 300,000 t/yr PVC plant to
90pc this month, amid the extended Eid holidays and softer
domestic demand.
Page 12 of 13
Polyvinyl chloride
Asia non-integrated PVC cash margin
PVC cash margin right
$/t
PVC cfr China left
1,100
225
1,020
150
940
75
860
0
780
-75
700
Jan 14
Apr 14
Jul 14
Oct 14
Jan 15
Apr 15
Vinyl chloride monomer (VCM) prices remained at the same
level of $690-700/t as two weeks ago, but VCM prices may
rebound since Formosa is planning to shut down its 800,000 t/
yr VCM unit for three weeks in July. Ethylene dichloride prices
remain stable at $350-370/t. With falling ethylene, non-integrated PVC producers saw smaller losses this week, with cash
margins eroding to -$36/t.
-150
Jul 15
Argus DeWitt Polymers is published by Argus Media Ltd.
Registered office
Argus House, 175 St John St, London, EC1V 4LW
Tel: +44 20 7780 4200 Fax: +44 870 868 4338
email: [email protected]
ISSN: 2053-9282
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the information published herein are the exclusive
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The data and other information published herein
(the “Data”) are provided on an “as is” basis. Argus
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