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Chevron Phillips Cedar Bayou polyethylene unit shuts down

September 15, 2021

Polyethylene (PE) Unit 1799 at Chevron Phillips’ Cedar Bayou facility in Baytown, TX shut down early Tuesday morning after the loss of a rotary feeder, according to a TCEQ filing.

It was unclear whether the shutdown was related to stormy weather from then-Tropical Storm Nicholas.
Market participants said Unit 1799 was scheduled to begin a planned turnaround this week, so the outage was not expected to have much impact.

Chevron Phillips does not discuss its turnaround schedules with third parties.

Unit 1799, with a capacity of roughly 500,000 mt/yr, uses loop slurry process technology to produce high density polyethylene (HDPE) homopolymer and copolymer grades, mainly for blow molding applications. The unit is a joint venture of Chevron Phillips and Ineos.

HDPE blow mold grades have been among the tightest resins in North America in 2021 because of strong domestic demand and supply constraints. Spot availability for export has been scarce, and domestic resale prices for generic prime HDPE BM are around 103-105 cts/lb railcar delivered, per OPIS PetroChem Wire data.

--Reporting by David Barry, david@petrochemwire.com
--Editing by Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


North American polyethylene producers test the market for more exports

August 24, 2021

US polyethylene (PE) producers were more active in the export market last week according to export traders, a sign that industry PE inventories are approaching normal levels after months of tight supply following Winter Storm Uri in February 2021.

The export offers did not excite much buying interest among traders, however.

“Producers were more active last week; they made the rounds and realized we cannot work with their numbers,” said one exporter.

Linear low density polyethylene (LLDPE) and low density polyethylene (LDPE) grades were the most readily available, while the supply of high density polyethylene (HDPE) for rigid applications remained relatively snug.

LLDPE butene film offers were reported at 69-70 cts/lb railcar FOB Houston, while international bids were put at 67-68 cts/lb. LLDPE butene film export prices have lingered in the low 70s cts/lb since May, and only showed signs of dipping below 70 cts/lb in August. Producers were testing the waters on LDPE film exports, with buying interest for conventional film grades pegged at 80-82 cts/lb railcar FOB Houston.

The HDPE blow mold export market has been illiquid throughout the summer because of extremely tight supply. Producers have been diverting all spot availability to the domestic market, where delivered railcar offers currently stand above $1/lb. Limited HDPE blow mold export allocations have been filled at 78-79 cts/lb railcar FOB Houston in recent months, but traders now estimate they would need pricing in the low 70s cts/lb to match the prices available from Asia and Mideast manufacturers.

Barring a hurricane or other unforeseen supply disruption, North American producers’ PE inventories will continue to build rapidly this fall unless export business ramps up.

A domestic distributor last week estimated that PE producers will need to increase their monthly export volumes by 500-600 million pounds to balance the market.

Some of the additional export volume will have to find a home in Latin American markets, which have pivoted to sourcing more resin from Asia and the Mideast in recent months because of tight North American supply.

Traders anticipate strong North American PE sales to Latin America in 4Q, although the prices levels are not yet clear. Import costs from Asia and the Mideast are rising because of higher freight rates, and shipping delays have also become an issue that favors North American suppliers.

Other additional North American PE export volume will flow through internal channels to markets in Asia and Europe. Already there are reports of direct sales of US-origin LDPE at $1300/mt (59 cts/lb) CFR China and high molecular weight (HMW) PE film at $1050/mt (47.6 cts/lb) CFR China.

--Reporting by: David Barry, david@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

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Ethylene Prices Plunge 17% at MtB-NOVA; Other Locations Take Milder Hits

August 11, 2021

Spot ethylene prices at the hub known as Mont Belvieu-NOVA dropped 8.5 cents/lb (16.9%) on Wednesday. Prices at the Mont Belvieu-EPC hub and the Choctaw hub were down 2 cents and 3.5 cents, respectively.

No news appeared to be attached to the sell-off. Steam cracker operating rates remained fairly high, with only two known outages in the Gulf. Downstream demand from polyethylene and PVC resin also appeared to still be firm, and some ethylene market participants themselves seemed a bit surprised at the sharply lower trades today.

August ethylene at the NOVA hub, which ended at 50.5 cts/lb on Tuesday, started the day trading at 45 cts/lb and later traded at 42 cts/lb. August ethylene at the EPC hub was offered down to 50 cts/lb but no new trades were seen. Aug ended Tuesday at 52.5 cpp. In the Louisiana ethylene market, a Sep trade at 55.5 cts/lb pulled August values down from 61 cts/lb to 57.5 cts/lb, as the Aug/Sep spread has been assessed at 2 cts/lb backward of late and no new markets emerged today to show that relationship had changed.

The declines appeared to have no immediate effect on polyethylene prices. High density blow mold grade remained at 78 cents/lb FOB Houston railcar and at 107 cts/lb railcar delivered east of the Rockies. Prices began rising rapidly in March following the winter storm in February that shut every polyethylene plant in Texas. Supply has been very tight ever since, and high logistics costs and long lead times for container ships have limited import volumes that could supplement US supply. Additionally, the container ship situation has meant that certain items such as polyethylene bags that are typically imported to the US have also been limited. This has forced resin converters to ramp up production of these finished products locally, further pulling on polyethylene demand.

Ethylene itself has had a relatively volatile year so far and the plunge could turn out to be an overcorrection, but that remains to be seen in Thursday's market.

--Reporting by David Barry, david@petrochemwire.com and Kathy Hall, kathy@petrochemwire.com;

--Editing by Donna Todd, donna@petrochemwire.com and Joe Link, joe@petrochemwire.com

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Effects of La Porte Chem Leak on Plants Unknown; Cracker Previously Shut

July 29, 2021

LyondellBasell's La Porte, Texas site had a chemical leak incident earlier this week, but the effects to all of the facility’s units were still not completely known. The site's steam cracker was understood to have already been shut at the time the incident occurred. The olefins unit experienced an unspecified operating issue on July 21, according to a community hotline posting. A LyondellBasell spokeswoman declined to specify if the incident involving a glacial acetic acid leak that left two contractors dead had affected any other plant operations.

The La Porte olefins unit is one of three units known to be shut in Texas. Formosa's Olefins 2 unit at Point Comfort, Texas has been shut since February and the company's Olefins 3 unit shut unexpectedly in early June. It was understood to now be running at reduced rates. Additionally, two olefins plants in Louisiana are shut. Westlake's Petro 1 unit at Lake Charles, Louisiana shut in late June and Indorama's unit at Lake Charles has been shut since August 2020. During the first half of July, the Sasol/Lyondell olefins complex at Lake Charles shut unexpectedly, as did one of the units at Dow Chemical's Freeport, Texas site.

The continued thirst for downstream PVC and polyethylene resin supply has kept pressure on all cracker operators to run at high rates, and spot ethylene prices have risen as a result. Spot ethylene at the NOVA and Enterprise hubs at Mont Belvieu, Texas began this month in the low 30s cents per pound range. As of market close on Wednesday, prices were 46.75 cts/lb at NOVA and 47.5 cts/lb at Enterprise. Spot ethylene for July delivery in Texas outside of the two hubs has been seen trading above 60 cts/lb. Spot ethylene prices in Louisiana moved from 33 cts/lb in early July to 57 cts/lb as of Wednesday.

Along with the swift rise of spot ethylene prices, downstream polyethylene and PVC prices have held at relatively high levels. This week, three PVC producers announced a 4 cpp price increase effective August 1, while Shintech split the increase into plus 2 cpp effective August 1 and 2 cpp effective September 1.

On a delivered railcar basis, high-density blow molding and injection grades of polyethylene were transacting in the $1.05-1.10/lb range, while low density polyethylene prices were above $1.10/lb. Domestic PVC prices, which settle retroactively, were $1.95/lb for pipe grade and $1.145/lb for general purpose grade in June.

--Reporting by Kathy Hall, kathy@petrochemwire.com;

--Editing by Donna Todd, donna@petrochemwire.com 

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New Texas polyethylene plant reaches mechanical completion

July 26, 2021

ExxonMobil and Sabic announced today that three derivatives units near Corpus Christi, TX have reached mechanical completion, and startup is expected ahead of schedule, likely in 4Q 2021.

Some processors have heard that prime PE pellets could be available as early as November 2021.

The new capacity, part of the Gulf Coast Growth Ventures (GCGV) project, includes a 1.1 million mt/yr monoethylene glycol unit and two PE units totaling 1.3 million mt/yr. The project is a 50/50 joint venture of ExxonMobil and Sabic, with ExxonMobil as site operator.

The grade slate for the PE units is expected to include metallocene-based LLDPE and conventional LLDPE butene film.

The units will utilize feedstock from a 1.8 million mt/yr ethane cracker, which is expected to start up later than the derivatives units, in 2022.

The North American polyethylene (PE) industry has seen tight supply and strong demand throughout 2021, but a new wave of capacity additions is expected in the coming year.

In addition to the GCGV project, Shell Chemical has a 1.5 million mt/yr ethane cracker/PE complex under construction at Monaca, PA. Customers are expecting product from that greenfield expansion as early as Apr 2022.

Bayport Polymers is building a 625,000 mt/yr HDPE plant at its existing facility in Pasadena, TX. Construction is expected to finish in 2021, according to the company’s website.

NOVA Chemicals is eyeing a 4Q 2022 startup date for a new 450,000 mt/yr PE unit near Sarnia, ON.

--Reporting by: David Barry, david@petrochemwire.com;

--Editing by: Joe Link,
joe@petrochemwire.com

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Dow sees no letup for 3Q polyethylene demand, continued price strength

July 22, 2021

Dow Chemical executives on Thursday painted a bullish polyethylene (PE) market picture for the remainder of 2021 after reporting 2Q Plastics and Specialty Packaging segment earnings of $2 billion, up $1.7 billion from a year ago.
“Downstream converter and brand owner inventories remain at all-time lows, with balances very tight,” said Dow President and CFO Howard Ungerleiter in an earnings call with analysts.

Citing American Chemistry Council data that showed demand for packaging applications in North America reached its strongest level in history in June, Ungerleiter said Dow expects those demand trends to continue, as customers are reporting above-normal order backlogs of 45-60 days.

“Recent small increases in producer inventories are due to a heavy turnaround season for the industry,” he added.
Dow expects its own turnaround expenses to increase by $150 million in 3Q due to planned maintenance on crackers in Canada and Spain.

The company’s Fort Saskatchewan, AB cracker in western Canada will add a furnace and expand its back-end capacity, resulting in an additional 130,000 mt/yr of capacity, which is designated for consumption by existing PE capacity.

For 2021, Dow expects maintenance spending to increase by about $500 million from 2020, partly because some projects were postponed amid the pandemic. An average year of maintenance spending for the company’s petrochemical fleet is about $1 billion/year, Ungerleiter said.

As for other expansions, Dow officials said they are revisiting plans for a 600,000 mt/yr PE project on the US Gulf that was pushed off when the COVID-19 pandemic began. A decision to advance that project could come this year.

--Reporting by David Barry, david@petrochemwire.com ;

--Editing by Joe Link, joe@petrochemwire.com

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US Ethylene Prices Saw Drastic Intra-Week Increase

July 13, 2021

Ethylene prices rose upwards of 16.25 cpp last week, representing the largest intra-week increase in an active market in the history of OPIS PetroChem Wire’s pricing data set (dating back to 2007).

July ethylene at the Mont Belvieu NOVA hub opened last Tuesday, July 6, at 31.5 cpp and ended the week trading at 44 cpp, a gain of nearly 40%. Front month pricing at the Mont Belvieu Enterprise hub traded as high as 46 cpp after market close on Friday, up 16.25 cpp (54.6%) from its opening value of 29.75 cpp last Tuesday morning. The Choctaw hub in Louisiana increased in value by 14 cpp (42.4%), opening the week at 33 cpp and moving to a value of 47 cpp on Friday.

The last time ethylene markets saw a price change this rapid in one week was in late April 2021, when prices at the NOVA hub decreased by 15 cpp. There were two weeks in January of 2021 where prices in both Texas and Louisiana fell 12-13 cpp. The only other time prices moved 12 cpp in one week in an active market was in April of 2010.

The ethylene market continued to climb as prices jumped even higher on Monday, July 12. Mont Belvieu ethylene traded up to 50 cpp at both the NOVA and Enterprise hubs; pricing at the Choctaw hub rose to 55 cpp.

Though US Gulf Coast steam cracker maximum estimated operating rates for July are tracking close to those for June, unexpected cracker outages and firm demand appear to be exerting a stronger pull on prices this month.

Ethylene exports from the Houston Ship Channel have increased recently with five known ethylene exports currently scheduled for July. There were seven vessels that loaded in June, according to shipbroker data. This compares to only two known exports in both April and May.

Downstream, PE operating rates are understood to be high in July as producers race to build inventories for the peak of hurricane season and for planned PE outages later in 2H 2021. Although high PE prices have caused some grumbling among downstream retailers, there has yet to be any meaningful drop in demand. The robust domestic demand picture has been supported by high freight costs from Asia and supply chain bottlenecks, which are hindering finished goods imports. Some PE market participants expect tight market conditions to persist until 4Q 2021.

North American polyethylene (PE) producers have implemented seven consecutive price increases through June, totaling 41-43 cpp, with an additional increase of 5-7 cpp proposed for July. Year-to-date domestic sales volumes are said to be 4-5% higher than the same period in 2020, despite supply disruptions that knocked capacity utilization down to around 70% in the February-March period.
US PVC prices have risen at an historic pace in the last year and a half, driven by high demand from a scalding hot construction market as well as production interruptions such as two hurricanes last summer and the freezing weather along the Gulf Coast in February. From January 2020 through May 2021, PVC contract prices rose by a net of 36 cpp. Prices rose by a net 16 cpp in 2020 and have risen by a further 20 cpp through May 2021.

PVC producers had announced a 3 cpp price increase for June, of which half has been predicted by market pundits to succeed. This prediction was based on export prices, which had begun to tumble early in the month. The recent strong upward movement in ethylene prices, however, may counteract the drag on pricing that export prices had been causing and allow PVC suppliers to implement the entire 3 cpp. No price increase had been announced for July, but continued strength in ethylene prices may prompt an August price increase announcement.

--Reporting by Julia Giordano, julia@petrochemwire.com, David Barry, david@petrochemwire.com and Donna Todd, donna@petrochemwire.com
--Editing by Kathy Hall, kathy@petrochemwire.com

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Location Spreads Yank Mt. Belvieu Ethylene Higher as La. Prices Soar

July 9, 2021

Ethylene prices in Louisiana are rising fast and they are taking Texas prices along for the ride.

Prices at the Mont Belvieu hubs rose upwards of 3.5 cpp on Wednesday based on location spread markets tying the front months to the Choctaw hub.

Prices at the NOVA hub increased from 33.25 cpp up to 35.25 cpp, and ethylene prices at the Enterprise hub increased from 32 cpp to 35.5 cpp.

When July ethylene at the Choctaw hub traded at 37.5 cpp, a July NOVA/Choctaw location spread market caused the front month at the NOVA hub to increase along with it.

Then, a July NOVA/Enterprise location spread market resulted in July Enterprise prices increasing as well. An August NOVA/Enterprise location spread market coupled with a July/August Enterprise spread trade caused the Enterprise front month pricing to increase even further.

Demand for ethylene is strong, particularly from plastics markets, but ethylene plant operating rates are high.

According to OPIS PetroChem Wire data, USGC steam cracker estimated maximum month-to-date operating rates for July are near 93%, up from 91% for June.

Ethylene exports from the Houston Ship Channel have increased in recent months with seven known vessels departing in June, according to shipbroker data. This compares to only two known exports in both April and May. There are five ethylene exports currently scheduled for July.

--Reporting by Julia Giordano, julia@petrochemwire.com
--Editing by Donna Todd, donna@petrochemwire.com and Kathy Hall, kathy@petrochemwire.com

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First Carbon Neutral Ethylene Voyage Made by Marubeni and Navigator

July 7, 2021


The world’s first carbon neutral ethylene vessel voyage is underway as the Navigator Triton sails from Morgan’s Point, Texas to Antwerp, Belgium.

Marubeni Corporation (Marubeni) and Navigator Holdings Ltd (Navigator Gas) announced today that the companies are working together to offset the CO2 emissions from the vessel’s passage by investing in a project focused on reducing emissions from forest degradation and deforestation (REDD+) based in Cambodia.

"We are proud to partner with Marubeni and look forward to enabling further carbon neutral voyages, a first in the ethylene shipping industry, and continue to promote and develop with the energy transition for our business and stakeholders,” said Oeyvind Lindeman, Chief Commercial Officer at Navigator Gas, in a press release posted to the company’s website this morning.

This move comes at a time when demand for ethylene exports from the US Gulf Coast is strengthening and more companies are searching for environmental solutions to either reduce or neutralize carbon emissions.

Ethylene exports from the US increased significantly with the start-up of the Enterprise Products LP (Enterprise) and Navigator Gas 50/50 joint-venture Enterprise Navigator Ethylene Terminal at Morgan's Point in early 2020. Regular term shipments from the terminal were seen all year and continue, and additional spot fixtures when arbitrages were open to Europe or Asia have kept activity brisk at times. In June, at least five cargoes moved ethylene from the Enterprise terminal to Europe and Asia, according to shipbroker reports. An additional five fixtures have been noted for July, including the Marubeni cargo on the Navigator Triton.

"We are happy to achieve the first ever carbon neutral ethylene voyage together with Navigator Gas. We wish to take on the challenge of finding further areas for carbon reduction to meet new customer needs and expectations" expressed Marubeni’s Satoru Ichinokawa, Executive Officer.

The development of carbon neutral ethylene cargoes comes two years after the first two carbon neutral LNG cargoes were delivered by Royal Dutch Shell to Tokyo Gas in Japan and GS Energy in Korea in 2019. Shell said last year that it had delivered another five such cargoes to Asian customers. An average 70,000 metric ton LNG cargo emits 240,000 metric tons of carbon dioxide equivalent across the value chain, Shell said.

TotalEnergies has also joined the offsetting LNG fray, delivering its first carbon neutral LNG cargo to China’s state-controlled oil company CNOOC in September last year.

OPIS daily Voluntary REDD+ Credits Average assessments ranged Tuesday from $6.40/mt to $7.725/mt, for vintages 2017 to 2021. The OPIS REDD+ assessment considers credits that are issued by Verra and are also certified with Climate, Community and Biodiversity Standards (CCB).

Spot ethylene pricing at the Enterprise storage hub at Mont Belvieu (which is connected to the terminal) was in a range of $600-770/mt during June and has been at $650-705/mt so far this month. In Europe, spot ethylene prices in June were heard to be in a range of $1,050-1,135/mt FD NWE and started July around $950/mt. In Asia, prices in June were heard in a range of $870-1,020/mt CFR Northeast Asia and $835-970/mt CFR Southeast Asia; and were around $950/mt CFR NE Asia and $900/mt CFR SE Asia at the start of July.

--Reporting by Julia Giordano, julia@petrochemwire.com  and Bridget Hunsucker, Bridget.Hunsucker@ihsmarkit.com;

--Editing by Donna Todd, donna@petrochemwire.com  and Kathy Hall, kathy@petrochemwire.com

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Enterprise Buys NOVA Chemicals Ethylene Storage, Trading Hub in Mont Belvieu

July 1, 2021

Effective Thursday, Enterprise Products Partners LP became the owner of an additional ethylene storage and trading hub in Mont Belvieu, Texas.

NOVA Chemicals Corp. sold its 308 million-lb. ethylene storage system to Enterprise, increasing Enterprise's total ethylene storage capacity in Mont Belvieu to about 908 million lbs.

"The combined system offers multiple benefits for producers, consumers and traders, such as increased physical connectivity, greater market liquidity and pricing transparency, as well as improved access to Enterprise's ethylene midstream services, including our export terminal and growing Gulf Coast pipeline system," said Enterprise's Chris D'Anna, senior vice president, petrochemicals, in a news release posted to the company's website this morning.

The transaction consolidates available merchant ethylene storage in the area to one sole lessor at Mont Belvieu. Along the U.S. Gulf Coast, the only other major available merchant ethylene storage assets are salt dome caverns in Choctaw and Sulphur, Louisiana, and one salt cavern near Beaumont, Texas.

The news release noted that NOVA Chemicals "will be a long-term storage customer in the Enterprise system."

"This transaction provides the best long-term solution for the Mont Belvieu ethylene storage business and trading hub, allowing NOVA Chemicals to focus on our core business of ethylene and polyethylene production, including the safe and successful completion of our world-class Advanced SCLAIRTECH technology facility in Ontario that will deliver recycle ready resins for sustainable packaging solutions," said NOVA Chemicals' John Thayer, senior vice president sales and marketing.

Enterprise continues to strengthen its position in the global ethylene market.

At the beginning of 2018, Enterprise and Navigator Holdings Ltd. announced the formation of the 50/50 joint venture Enterprise Navigator Ethylene Terminal LLC. Two years after the announcement, the first ethylene vessel was loaded at the newly commissioned Enterprise Navigator Ethylene Terminal at Morgan's Point, Texas, in January 2020.

Meanwhile, Enterprise was also in the process of commissioning its initial ethylene storage hub in Mont Belvieu. The first reported trades in the new hub occurred in May 2020, and OPIS PetroChem Wire began publishing the third daily U.S. Gulf Coast ethylene price (MtB-EPC) in July 2020 (MtB-NOVA and Choctaw ethylene were the first two).

Spot ethylene prices ended June at 31 cpp at the previously owned NOVA Mont Belvieu hub and at 30 cpp at the original Enterprise Mont Belvieu hub. Prices at the Choctaw hub in Louisiana saw a small premium to Mont Belvieu prices, ending the month at 33 cpp.

 

--Reporting by Julia Giordano, julia@petrochemwire.com;

--Editing by Donna Todd, donna@petrochemwire.com, and Kathy Hall, kathy@petrochemwire.com

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NOVA Chemicals’ Olefins Unit at Geismar Restarts; Ethylene FM Ended

June 30, 2021

NOVA Chemicals’ olefins unit at Geismar, Louisiana, has restarted, a company spokesperson confirmed on Wednesday. The plant, which has an ethylene capacity of 1.95 billion pounds per year (or 5.34 million pounds per day), shut in mid-June as a result of a mechanical failure. At the time, the outage was expected to last two weeks. The company had declared force majeure on ethylene from the site, and that has ended.

The restart of the plant, which represents 2.25% of US capacity, brought operating rates at olefins plants in Louisiana to 90%. Several outages during June brought this aggregate rate to nearly 80% at its low, down from 89-90% in May.

Overall operating rates of olefins plants in Texas have been steady 92-93% in June, with only three units shut this month. Formosa's Olefins 3 cracker at Point Comfort was in the process of restarting on Monday, according to a TCEQ filing. That unit was down since early June.

Spot ethylene prices in Louisiana have held a small premium to prices in Texas for much of the month. Spot prices for June ethylene at the Choctaw (Louisiana) storage hub were 33 cents/lb, while spot prices at the Enterprise Mont Belvieu hub were 30 cents/lb and prices at the NOVA Mont Belvieu hub were 31 cpp.

--Reporting by Julia Giordano, julia@petrochemwire.com  and David Barry, david@petrochemwire.com;

--Editing by Kathy Hall, kathy@petrochemwire.com 

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Plant Outages Boost Ethylene Prices Amid Recovery from Uri

April 15, 2021

Outages at steam crackers in the US Gulf Coast are exacerbating ethylene production as the market struggles to recover in the aftermath of Winter Storm Uri. Ethylene prices rose drastically after Uri swept its way across the region starting on Feb 14, causing nearly every major chemical complex in Texas to shut, according to sources at multiple asset operators. Facilities began restarting over the weekend of Feb 20-21, and the area was nearing normal operating rates when four crackers went down over the past two weeks.

In Louisiana, Shell’s Norco OL-5 unit went down on Wednesday, Apr 7, on what is understood to be an estimated 60-day planned turnaround, followed by the NOVA Geismar cracker unexpectedly shutting down on Saturday, Apr 10, due to inclement weather. In Texas, both the Formosa OL-1 unit in Point Comfort and the INEOS Chocolate Bayou 2 unit went down for unplanned maintenance on Monday, Apr 12.

“Our view for global ethylene is that we think fundamentally more capacity came on stream in 2019-2021 - and we will see even more going forward - that outpaces demand growth,” said Steve Lewandowski, VP Global Olefins for IHS Markit. “We feel that on the ground there is going to be plenty of ethylene supply capability, it’s just a matter of how well it runs. So, once we get beyond turnarounds, and hopefully we don’t have as many weather events, we start replenishing this inventory. We think by the end of the second quarter at the soonest, but not much later than the middle of the third quarter, we should see restocking of ethylene in the value chain which should then put pressure on the whole ethylene complex around the world.”

According to OPIS PetroChem Wire data, USGC steam cracker estimated maximum daily operating rates got as low as 23% in response to Winter Storm Uri, with the rates in Texas dipping to just over 1%. Production slowly ramped back up and, before the recent outages, daily rates were up to approximately 79% for the USGC, supported by rates in Texas increasing to almost 74% as of Apr 6. These four new outages brought the USGC daily rates back down to an estimated 73% as of Apr 14.

In the days leading up to Uri, ethylene prices ranged from 35-36 cts/lb across the three major USGC hubs. Prices spiked to 59-59.5 cts/lb at varying times across the hubs in the months that followed, before they saw a sharp decrease to 49.75-52.25 cts/lb on Apr 8 and 9. However, prices began to steadily increase again starting the following Monday, and by Wednesday, Apr 14, prices were up to 62.5-68 cts/lb across the hubs as the impacts of the recent cracker outages reached the market.

“When we do our statistical price modeling and forward market fundamental analysis, everything is pointing to prices coming off to the mid- to low-30 cpp range in either May, Jun, or, at the latest, Jul when cracker operations stabilize and capacity is over supplied in the market,” said Carlo Barrasa, Executive Director Global Olefins for IHS Markit.

--Reporting by Julia Giordano, julia@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

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U.S. Polyethylene Exports Sag After February Freeze-Related Outages

April 7, 2021

U.S. polyethylene (PE) export volumes were 195,580 mt (-21%) lower in February at 742,001 mt, according to customs data from the Commerce Department, which came as most U.S. Gulf Coast petrochemical facilities were offline in the aftermath of the mid-February winter storms.

An international trader said that export volumes likely fell further in March, as U.S. suppliers struggled to catch up from the February outages.

In recent history, North American PE producers have depended on exports for more than a third of their sales volumes.

The export destinations with the largest February declines in shipments were all in Asia. February volumes to China were 69,091 mt, half of what they were in January. Volumes to Malaysia, Singapore and Vietnam were down by a combined 69,514 mt in February.

Brazil became the second largest PE destination in February with shipments totaling 79,615 mt, up 3,673 mt (5%) from January.

Mexico, the largest destination for U.S. February PE shipments at 111,880 mt, was down 14,789 mt (12%).

In the polypropylene (PP) market, participants were expecting a surge of imports in February because of tight domestic supply and an international price gap that began to widen in January 2021.

However, U.S. PP import volumes fell in February as high freight costs and limited container availability hindered international trade flows.

U.S. PP imports (including propylene copolymers) totaled 34,327 mt in February, down 18% from January and a five-month low. However, an influx of PP cargoes is expected in March and April.

Many domestic PP buyers sought out international supplies after the February winter storms, and the arbitrage for PP imports remains wide open, even taking elevated freight costs into account.

On Jan. 8, the spread between polypropylene homopolymer (HoPP) raffia grade in Houston and the CFR Southeast Asia market was 17-18 cts/lb, according to OPIS PetroChem Wire data. By Jan. 29, that spread had widened to about 24 cts/lb, and as of April 1, it stood at an eye-popping 42 cts/lb.

 

--Reporting by David Barry, david@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

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Latin America Polyethylene Buyers Retreat as Prices Soften

March 25, 2021

Polyethylene (PE) import buying in Latin America markets has paused since mid-March as offer prices have stabilized and, in some cases, fallen from earlier in the month, traders said this week.

The shift in international market sentiment will create headwinds for U.S. PE producers seeking to raise prices for April export volumes. Producers are targeting domestic price increases of 7-9cts/lb. in April and are expected to push for export price increases as well.

Spot PE export business from the U.S. has been halted since the February freeze, and that seems unlikely to change in April. Suppliers will have volumes allocated to distributors, but the prices may be higher.

Some traders speculated that U.S. producers will test the export market with prices around 77-78cts/lb. railcar FOB Houston for high density PE (HDPE) and linear low density PE (LLDPE), but firm price ideas have not yet been given.

"I don't think [U.S. producers] will have much to offer, and it will be challenging to sell," commented an export trader.

This week, HDPE blow mold export prices were notionally stable at 76cts/lb. railcar FOB Houston and LLDPE butene film was at 74cts/lb. railcar FOB Houston, according to OPIS PetroChem Wire data.

Traders predicted that US PE export availability will improve in May and June, and prices will come down during that period, as well.

In Latin America, LLDPE butene film selling prices were seen at $1,800-1,830/mt (81.6-83cts/lb.) CFR WCSA last week, but notional pricing has retreated below $1,800/mt (81.6cts/lb.) this week. Availability from Asia was mentioned as low as $1,720-1,740/mt (78-78.9cts/lb.) CFR WCSA. By comparison, LLDPE butene film prices were in the mid-to-upper-$900s/mt as recently as four months ago.

HDPE blow mold prices have also pulled back. Some traders reported limited buying interest at $1,850-1,900/mt (83.9-86.2cts/lb.) CFR WCSA earlier this week. Others saw the market price pulling back to $1,800/mt (81.6cts/lb.), and even at that price buyers were on the sidelines.

Low density PE (LDPE) film prices have been relatively firm, with Asia cargoes quoted at $1,980-2,100/mt (89.8-95.3cts/lb.) CFR WCSA and limited U.S. cargoes offered at $2,100-2,150/mt (95.3-97.5cts/lb.) CFR WCSA.

High molecular weight PE (HMWPE) film grades were quoted at $1,850-1,900/mt (83.9-86.2cts/lb.) earlier this month, but increased competition from Asia has forced traders to pull offers back to $1,800/mt (86.1cts/lb.) CFR WCSA.

With crude oil prices backsliding, some Asia PE suppliers appear to have given up trying to calibrate their Latin America offer prices to the U.S. market, because the gap between China and South America PE prices has gotten too big, traders said. Also, resin demand in South America is expected to slow in April because of Easter holidays and elections.

 

--Reporting by David Barry, david@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


 

Braskem Idesa polyethylene output rates fell to 74% in 2020: Company Report

March 11, 2021


Braskem Idesa’s polyethylene (PE) plant at Nanchital, Mexico operated at 74% of capacity in 2020, down 2 percentage points from the prior year, after the site’s operations were halted at the beginning of December, Braskem said today in an annual management report.

The site’s 4Q 2020 utilization rate fell to 48%, down from 84% in the prior quarter, after a disagreement over the ethane supply contract led to the cutoff of natural gas supply to the facility by the Mexican government.

Braskem Idesa has since signed a memorandum of understanding with Pemex to discuss potential amendments to their ethane supply contract, and gas supply was restored on March 1.

Customers in Mexico have indicated they expect to be back to normal supply levels by April.

Braskem Idesa has also taken steps to increase its supply of imported ethane after years of being unable to run its facility at full rates due to feedstock constraints.

In 4Q 2020, Braskem-Idesa imported 35,000 mt (average of 7,000 b/d) ethane from the US, representing 9% of the facility’s feedstock utilization capacity, according to the Braskem report.

In December, Braskem Idesa completed an expansion of its ethane import operation, bringing the current expected capacity to 20,000 b/d, or about 30% of the site’s total ethane requirement.

Braskem Idesa’s PE sales totaled 845,000 mt in 2020, up 4% from 813,000 mt in 2019. Sales to Mexico were at 53% of the total (down from 59% a year earlier), while sales to the US and Latin America increased to 13% and 19%, respectively. Sales to Europe also increased, from 8% to 12%, and sales to Asia fell from 11% to 4% of the total.
Bag and film applications accounted for a larger percentage of PE sales in 2020 at 39%, up from 34% in 2019, while construction/infrastructure-related sales fell from 14% to 9%.

Braskem Idesa’s operating results for 2020 include a $119 million accounting provision related to the write-off of the amount receivable from Braskem Idesa as a payment for damages for the supply of ethane in volumes below that established in the ethane supply agreement with Pemex.

Braskem Idesa expects to invest $34 million in 2021 for operating efficiency gains, such as the ethane import project and maintenance.


--Reporting by David Barry, david@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


 

Polymer Grade Propylene Prices Reach Record on Tight Supply

February 23, 2021

Polymer grade propylene (PGP) prices reached a record as strained supply continued to meet heightened demand.
PGP prices increased rapidly since the start of the month as Enterprise Products took its propane dehydrogenation (PDH) unit in Mont Belvieu, TX down for a planned turnaround. Over the first two weeks of February, PGP increased from its open of 73.375 cts/lb on February 1 to 98 cts/lb by February 9. As of Monday morning, February 16, markets were relatively quiet as the impact of Winter Storm Uri was being assessed.

“The US propylene spot market has surged to all-time highs on the back of low inventories, reduced supply and surging downstream demand,” said Carlo Barrasa, Research and Analysis Director for North America Light Olefins at IHS Markit. “The other factor at play is the lack of derivative imports into the US as container shipping is much more expensive relative to historical patterns in addition to shipping delays.”

While PGP prices rose quickly, they reached what may be a ceiling at 98 cts/lb, with a total of 43 million lbs trading at that level February 9 and 10 before the market fell quiet. Demand destruction was seen in downstream markets as the high feedstock prices resulted in unprofitable production. Market participants began to wonder when PGP prices would fall off, but Feb offers held steady at 98 cts/lb through February 12.

According to OPIS PetroChem Wire (PCW) data, the last time PGP was valued near this level was in 2011 when the previous all-time high price for PGP was seen at 93.5 cts/lb from Apr 27-May 12.

“This is a significant price rise, but importers of US-sourced monomers have reduced their exposure, cracker operators are switching to heavier feeds, and refiners are pulling more propylene out of gasoline production to respond to the market; when Enterprise resumes operations in April (combined with the initial arrivals of derivative imports), we believe the prices correct rather rapidly,” Carlo added.

Prices for refinery grade propylene (RGP), the dominant feedstock in the US Gulf Coast that is upgraded to make PGP, have also been rising. Varying demand for delivery mode has created a large disparity between pipeline and railcar prices. Prompt RGP prices delivered by pipeline in Enterprise's system at Mont Belvieu rose from 36 cts/lb at the start of January to 39.875 cts/lb in early February. While not much of an increase, the hotter commodity is RGP delivered by railcar, where prices spiked from just above 40 cts/lb a few weeks ago to 66 cts/lb in the first week of February. Typically, premiums on rail material are within 5 cts/lb of the pipeline price; they are currently more than 20 cents.
RGP is a by-product of vacuum gasoil inputted to fluid catalytic crackers, a major producer of gasoline at a typical US Gulf Coast refinery. According to monthly data released last week by the US Energy Information Administration (EIA), FCC inputs have been radically reduced.

Estimated refinery operable utilization rates in PADD 3 were 84.3%, according to EIA data for the week ending January 15. This is compared to 90.2% last year and 92.9% in 2019, reflecting refinery reductions that continue to linger following the decrease in fuel demand caused by COVID-19.

The decrease in RGP supply off US Gulf Coast refineries continues to further an already tight RGP railcar market. In response, bids have consistently been seen in the market for chemical grade propylene (CGP) railcars – a costly substitute for scarce RGP. CGP pipeline bids emerged at the beginning of February.

Shell permanently shut down its Convent, LA refinery at the end of 2020. The Shell Convent capacity that was closed included a 92,300 b/d FCC unit that supplied RGP to the US Gulf Coast pipeline network.

With a decrease in refinery rates from refinery shutdowns comes a decrease in RGP supply headed for propylene splitters, therefore reducing available PGP supply. On-purpose PGP production has been impacted since the start of December due to operational issues at the Enterprise Products PDH unit at Mont Belvieu, TX.

Downstream, tight PGP monomer supply has played a role in limiting polypropylene (PP) operating rates. North American PP capacity utilization was at 90-91% in November and December as average producer inventory days dropped into the high 20s, according to data from the ACC Plastics Industry Producers’ Statistics Group.

With demand falling and import volumes picking up, PP buyers feel a market correction is coming, but it remains to be seen how quickly prices will rewind. “It doesn’t take a huge change in demand to make PP prices drop,” one industry veteran observed.

--Reporting by Julia Giordano, julia@petrochemwire.com; David Barry, david@petrochemwire.com; Robert Sharp, robert@petrochemwire.com
--Editing by Joe link, joe@petrochemwire.com 

Copyright, Oil Price Information Service


 

US Polypropylene Demand Hitting a Wall With February Price Spike

February 11, 2021

More U.S. polypropylene (PP) end users are saying that they will idle or cut back unprofitable production lines amid fast-rising resin costs, market participants said.

"I've never heard customers cutting back as much as I've heard in the past week," one resin broker said.

Another reseller said a few PP end users were idling production, but not enough to bring about a significant shift to the overall market's tight supply balance.

PP contract prices have increased by double digits in December and January, for a total increase of 26cts/lb., and buyers are bracing for February contract prices to increase by more than 20cts/lb.

As of Wednesday, the domestic resale market for injection molding grades of PP homopolymer was assessed at 100-105cts/lb. railcar delivered, up from the low-40s cts/lb. in mid-2020. Wide spec resin was trading from the low 90s cts/lb. railcar delivered to well above $1/lb. this month, depending on the resin properties and destination. Imported prime PP was reportedly selling in the high 90s cts/lb. FOB warehouse.

"This is a real wakeup call for anyone using PP in any application," one buyer noted, adding that it was impossible to raise finished goods prices fast enough to keep pace with the resin cost surge.A PP producer reported hearing from some customers who are finishing their January resin inventories and then stopping production on unprofitable lines. These are mainly customers in price-sensitive commodity markets such as injection molded housewares and rope/twine, the producer said.

Some processors are looking to shift production to cheaper polyethylene (PE) or polyethylene terephthalate (PET) resins, but the transition is not simple, requiring different production tools and yielding a product with different properties.

North American PP supply has been historically tight in recent months, dating back to the 2020 summer when the industry saw a number of plant outages followed by Hurricane Laura and Hurricane Delta, which damaged LyondellBasell's massive PP facility in Lake Charles, Louisiana. Just this week, LyondellBasell lifted its PP force majeure declaration from those events.

Three other U.S. suppliers still have PP force majeure declarations in place: Ineos, Formosa and Total. In addition to plant issues and scheduled maintenance, the PP industry is facing a monomer shortage that shows no sign of easing in the near term. Spot polymer grade propylene prices surged to a record 98cts/lb. this week.

Tight monomer supply has played a role in limiting PP operating rates. North American PP capacity utilization was at 90%-91% in November and December as average producer inventory days dropped into the high 20s, according to data from the ACC Plastics Industry Producers' Statistics Group.

With demand falling and import volumes picking up, PP buyers feel a market correction is coming, but it remains to be seen how quickly prices will rewind.

"It doesn't take a huge change in demand to make PP prices drop," one industry veteran observed.

 

--Reporting by David Barry, david@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


 

Ethylene Prices See Steep Decline After Recent Highs

January 25, 2021

Ethylene prices dropped up to 31% in the past week, ending a late-December and early-January surge, amid an uptick in selling offers and reports of demand destruction hitting some of the derivative markets.

The MtB-NOVA hub dropped from an opening price of 42cts/lb. on Tuesday to a closing price of 29cts/lb. on Friday, representing a 31%, or 13cts/lb., decrease. The MtB-EPC hub moved also from 42cts/lb. on Monday's open to 29cts/lb. at Friday's close. The Choctaw hub ended the week at 29.75cts/lb. after also opening the week at 42cts/lb., moving down 29%.

Low prices near these levels were last seen at the beginning of December.

These downward movements have been spurred mostly by sellers offering the markets down -- and not always at a slow and steady pace. Some offers moved down as high as 1.75cts/lb. at a time. Normal market movements typically have bids and offers changing at a pace of 0.25 to 0.5cts/lb. at a time. At the NOVA hub, broker markets resulted in 27 downward movements of front month pricing -- mostly due to lower offers, as only six trades were seen.

This is a drastic change of pace for the ethylene market after seeing large pricing increases across all hubs in December and the first two weeks of January.

Over December 2020, MtB-NOVA ethylene was up 44%, moving from 22.5cts/lb. to 32.5 cts/lb. The MtB-EPC hub increased 36%, going from 23.5cts/lb. on Dec. 1 to 32cts/lb. at the end of the year. Choctaw increased 32% from 24.25cts/lb. on Dec 1. to 32cts/lb. at month's end.

Ethylene prices continued to rise over the first two weeks of 2021. The MtB-NOVA hub saw a 24% increase, moving from a January opening price of 33.75cts/lb. to a closing price of 42cts/lb. on Jan. 15. Ethylene at the MtB-EPC hub moved from 31cts/lb. to 42cts/lb. a 35% increase. Assessments at the Choctaw hub increased 32cts/lb. to 42cts/lb., representing a 31% increase.

Jan. 15 was only the second time since the inception of the MtB-EPC ethylene hub that all three locations were assessed at parity. The first instance was on May 27, 2020, when all three locations were valued at 12cts/lb.

Recent price increases seen in December and at the beginning of January were attributed to healthy spot ethylene exports and a strong pull from the downstream markets. Early-January increases also saw short covering in the ethylene market coming into play.

However, the current decreases are not stemming from any onslaught of ethylene supply coming off steam crackers. According to OPIS PetroChem Wire, maximum U.S. Gulf Coast steam cracker operating rates have been holding steady near 93% month to date for the start of the year. This rate is slightly down from December's estimate of 95%.

Spot ethylene exports continue to strengthen in January with nine vessels currently scheduled (89,800 mt/198 million lbs.) for January vessel loading windows. Three of nine are heading for Europe with the remaining six understood to be destined for Asia. This compares to eight spot vessels that were scheduled for December (89,800 mt/197.97 million lbs.) and six pot cargoes that were scheduled for November (60,000 mt/132.3 million lbs).

Downstream markets started to see the impact of the recent high ethylene prices with reports of demand destruction hitting some of the derivative markets.

In the U.S. polyethylene (PE) market, a combination of production problems and strong domestic demand has helped keep the market tight and has given support to a 5ct/lb. January contract price increase. Producers have announced a 7ct/lb. February price increase. In addition to confirmed unit outages at Formosa in Point Comfort, Texas, and Braskem-Idesa in Nanchital, Veracruz, Mexico, several other U.S. PE producers are reported to have experienced plant problems or to have planned maintenance outages scheduled for first-quarter 2021.

However, higher prices and limited supply have slowed PE export business, with Houston packaging warehouses reported to be much quieter than in December 2020.

China and other Asia PE markets have cooled with the approaching Lunar New Year holiday, and the arbitrage window from the U.S. to Asia now firmly shut. Other regions, such as Europe and Latin America, have continued to pay the higher prices for U.S. exports, but traders are concerned that the market could rapidly change course.

Demand for polyvinyl chloride (PVC) continues to be high into the domestic market, and producers and converters expect that to continue. But, due to a busy turnaround schedule for the remainder of the first quarter and into the second, producers will have only limited tonnage available for export during that time.

PVC producers announced domestic price increases of 4 cpp for January and 3 cpp for February, which will settle at the end of February and March, respectively.

Out of the 7 cpp announced for the two months, market pundits have predicted that at least 5 cpp will go through.

PVC buyers are watching ethylene prices and PVC export prices to discern the direction that domestic prices will take. Buyers hope the recent ethylene spot market collapse will be sustained and result in substantial reductions in ethylene contract pricing, as this would translate into lower contract PVC prices. Ethylene is half of the PVC molecule, but it is a significant price driver for PVC.

As for export pricing, traders believe that pricing in the international market, especially in Asia, has peaked. They think prices will begin to fall after Lunar New Year, if not before.

PVC prices are expected to see downward pressure once the new Shintech PVC capacity comes online in the second quarter.

 

--Reporting by Julia Giordano, julia@petrochemwire.com; David Barry, david@petrochemwire.com; and Donna Todd, donna@petrochemwire.com;

--Editing by Joe link, joe@petrochemwire.com

Copyright, Oil Price Information Service


 

Polymer Grade Propylene Prices Extend Increases

January 25, 2021

Polymer grade propylene (PGP) prices continue to rise at the start of the new year.

January MtB-EPC PGP prices opened on Jan. 1 at 55.5cts/lb. By market close on Jan. 22, January PGP was valued at 67cts/lb., representing a 21%, or 11.5ct/lb., increase over the first three weeks.

This comes after a large price increase at the end of 2020. December MtB-EPC PGP prices opened on Dec. 1 at 39.5cts/lb. PGP prices increased by 15.25cts/lb., or 38.6%, to 54.75cts/lb. by market close on Dec. 31.

Previously, MtB-EPC PGP had reached a high of 39cts/lb. on Jul 28, 2020. At the time, overall maximum propane dehydrogenation ("PDH") unit operating rates were estimated at 48.65% month to date for July, according to OPIS PetroChem Wire data. Operational issues were reported at all three U.S. Gulf Coast PDH units that month -- Dow at Freeport, Texas; Enterprise Products at Mont Belvieu, Texas; and Flint Hills Resources at Houston, Texas. Spot PGP exports had come to a complete halt that month, with no vessels confirmed for July compared to three spot vessels in both May and June.

Refinery grade propylene (RGP) saw similar price increases in December, though the market has been relatively stable so far in January.

December MtB-EPC RGP was assessed at 21cts/lb. on Dec. 1. It increased by 24%, or 15cts/lb., to 36cts/lb. by the end of December. January MtB-EPC RGP started the month at 36cts/lb. and increased slightly to 37cts/lb. on Jan. 14. Late in the day on Friday, January traded at 39cts/lb.

Earlier in 2020, RGP had reached a high of 20.25cts/lb. on Sept. 2. This was shortly after Hurricane Laura made landfall near Lake Charles, Louisiana, impacting the refineries in the area (CITGO and Phillips 66).

The spread between RGP and PGP was at 30cts/lb. by market close on Jan. 22. In December, the spread reached a peak of 25cts/lb. mid-month before RGP prices started to rise. For comparison, the average spread over the course of 2020 was 15.38cts/lb. The mode over the course of the year was 18.75cts/lb.

A spread of over 29cts/lb. was last seen on Jan. 18, 2018 when PGP was 29.5cts/lb above RGP. Prior to that, spreads have not been this high since the fall of 2008 when they rose to 50.75cts/lb.

RGP is a by-product of vacuum gasoil inputted to fluid catalytic crackers, a major producer of gasoline at a typical U.S. Gulf Coast refinery.

According to monthly data released last week by the U.S. Energy Information Administration (EIA), FCC inputs have been radically reduced.

Through October of this year, the average input of VGO to an FCC in PADD3 was 2,105,400 b/d, compared to 2,493,000 b/d for the entire year of 2019 or 2,603,000 b/d for 2018.

From April (the beginning of the COVID-19 lockdown) through September, the FCC input for PADD3 is 2,076,140 b/d; the figure for 2019 is 2,508,000 b/d.

According to EIA data for the week ending Jan. 15, estimated refinery operable utilization rates in PADD3 were 82.5%, compared to 92.2% last year, reflecting refinery reductions that continue to linger following the decrease in fuel demand caused by COVID-19.

Shell began the permanent shutdown of its Convent, Louisiana, refinery on Nov. 30. The Shell Convent capacity that was closed included a 92,300-b/d FCC unit that supplied RGP to the U.S. Gulf Coast pipeline network.

The decrease in RGP supply continues to further an already tight RGP railcar market. January TX-Other railcar RGP has traded at an implied premium of up to 13cts/lb. above January MtB-EPC pipeline RGP. In addition, bids have consistently been seen in the market for chemical grade propylene (CGP) railcars -- a costly substitute for scarce RGP.

With a decrease in refinery rates comes a decrease in RGP supply headed for propylene splitters, therefore reducing available PGP supply. On-purpose PGP production has been impacted since the start of December due to operational issues at the Enterprise Products PDH unit at Mont Belvieu, Texas. The unit is expected to go down for turnaround in the coming weeks.

Polypropylene (PP) supply has remained very tight, with U.S. producers indicating that sold out conditions are likely to remain in place through 1Q 2021. At least three PP producers still have force majeure declarations in place. However, PP prices have risen by double digits in both December and January, which is putting pressure on plastic processors that have limited ability to pass along the higher costs. The higher prices are also straining credit limits, with processors having to pay twice as much for a railcar or bulk truck delivery of resin as they did in early 2020.

PP demand destruction is already occurring, as some injections molders switch to alternate materials such as high density polyethylene (HDPE). PP import volumes are also rising, although high freight costs and long lead times from Asia are both mentioned as limiting factors. Brokers say they are reluctant to book PP imports for March arrival because the current run of higher prices may not last, and it can be difficult to place imported resin in a falling market.

 

--Reporting by Julia Giordano, julia@petrochemwire.com, David Barry, david@petrochemwire.com, Robert Sharp, robert@petrochemwire.com;
--Editing by Joe link, joe@petrochemwire.com

Copyright, Oil Price Information Service


 

US Polyethylene Export Activity Slumps Amid Tight Domestic Supply

January 21, 2021

US polyethylene (PE) spot exports have slowed to a standstill as producers address strong domestic demand and numerous supply issues, traders said this week.

For the limited volumes that are available, prices have increased to levels not seen since mid-2018.

High-density polyethylene for blow molding (HDPE BM) has been one of the tightest grades, with export prices rising by 10cts/lb. over the past four weeks to 55cts/lb. ($1,213/mt) railcar FOB Houston on Wednesday. Traders have not seen offers this week, and notional buying indications were discussed Thursday at 56-57cts/lb.

In Latin America, HDPE BM selling prices were put at $1,380-$1,400/mt (62.6-63.5 cpp) CFR West Coast South America (WCSA). Prices were last at these levels in March 2018, according to OPIS PetroChem Wire data.

North American HDPE BM supply has been crimped by outages at Braskem-Idesa's plant at Nanchital, Veracruz, Mexico and Formosa's plant at Point Comfort, Texas. Braskem-Idesa has restarted its facility on a limited basis, but operating rates were understood to be below 50%. Formosa on Wednesday said it experienced a new operating issue at the Point Comfort plant earlier in the week, requiring an estimated nine days for repairs. The company expects to continue allocating HDPE BM grades through February. In addition, at least two other U.S. suppliers have planned maintenance scheduled for HDPE units in 1Q 2021, according to customers.

Linear low density polyethylene for film extrusion (LLDPE film) supply has been relatively well-balanced, with prices rising by about 4cts/lb. over the past four weeks to 50cts/lb. railcar FOB Houston on Wednesday. In Latin America, LLDPE film selling prices were transitioning higher at around $1250/mt (56.7 cpp) CFR WCSA this week, the highest level since June 2018.

Low-density polyethylene (LDPE) film export prices have risen to 60-62cts/lb. railcar FOB Houston, up 5-7cts/lb. over the past four weeks, while high molecular weight PE (HMWPE) film grades were discussed in a range of 52-55cts/lb. railcar FOB Houston, up as much as 10cts/lb.

The rapid price increases for U.S. markets are in stark contrast with a flat PE market in Asia. However, container freight rates from Asia to the rest of the world have skyrocketed by $200/mt (9 cpp) or more relative to normal levels, and this has allowed U.S. producers to raise offers to markets such as Europe and Latin America without facing competition from Asia. It is unclear when the imbalance in container freight will be resolved, but traders indicate it unlikely to happen this quarter.

Eventually, the North American PE price disparity with Asia will need to be resolved so that PE exports to Asia's vast markets can return to normal.

Monthly export volumes for U.S. and Canadian producers accounted for nearly 40% of total sales in 2020, according to an analysis of industry data compiled by the American Chemistry Council.

For now, reduced U.S. export activity may help restore balance to a tight domestic PE market over the next month or two. Traders expect the limited export availability to continue through February and possibly into March.

 

--Reporting by David Barry, david@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


 

Ethylene Prices Continue to Soar at the Start of the New Year

January 12, 2021

Ethylene prices rose quickly during the first week of 2021. Assessments at the Choctaw hub increased from a Jan opening price of 32 cpp on Monday morning to a closing price of 44 cpp on Friday afternoon, representing a 38% increase. The MtB-NOVA hub saw a 32% increase, moving from 33.75 cpp on Monday to 44.5 cpp on Friday afternoon. Ethylene at the MtB-EPC hub moved from 31 cpp early Monday to 42 cpp late Friday – a 35% increase.

These increases come after large price moves were seen in Dec. Over the last month of 2020, Choctaw ethylene increased 32% from 24.25 cpp on Dec 1 to 32 cpp at month’s end. MtB-NOVA was up 44%, moving from 22.5 cpp to 32.5 cpp. The MtB-EPC hub increased 36%, going from 23.5 cpp on Dec 1 to 32 cpp at the end of the year.

The market fundamentals that were present in Dec continued to be a factor in the first month of the year with healthy ethylene supply being overcome by an increase in both downstream and spot export demand.

Ethylene supply remained relatively strong with estimated maximum US Gulf Coast steam cracker operating rates near 93% month to date for the start of the year, according to OPIS PetroChem Wire data. This rate is slightly down from Dec’s estimate of 95%.

Formosa’s Olefins I unit at its Point Comfort, TX facility remains down from a turnaround that started in Mar 2020. The unit is expected to come up in 1Q 2021. In addition, the facility’s Olefins III unit went down for an unplanned shutdown on Dec 19, according to a TCEQ filing.

Indorama’s Lake Charles, LA facility is also expected to return to service in 1Q 2021 after going down from a lightning strike on Aug 1, 2020.

A few TCEQ filings were seen in the first week of Jan, though none of the instances were understood to be major events. One of note stated that Shell shut the furnaces at its OL-3 olefins unit in Deer Park, TX on Jan 5 in an effort to stop emissions and flaring at the unit, which flared for 16 hours following an unspecified process upset.

For comparison, operating rates were down to 69% in the US Gulf Coast at the peak of the outages caused by Hurricanes Laura and Delta at the start of 4Q 2020. Spot ethylene export volumes declined as a result of the cracker outages caused by the hurricanes. August saw five vessels (49,000 mt/108 million lbs) followed by three vessels in Sep (42,000 mt/92.6 million lbs). Only 28,000 mt (92.6 million lbs) moved across the docks on a spot basis in Oct on three separate vessels.

As supply came back online after the storms, spot ethylene exports increased.

Six spot cargoes were scheduled for Nov (60,000 mt/132.3 million lbs) followed by eight scheduled for Dec (89,800 mt/197.97 million lbs). This compares to the previous monthly high in Jul 2020 of 11 spot ethylene vessels totaling 99,200 mt (218.7 million lbs).

By the end of the first week in Jan, eight spot exports were already scheduled (83,300 mt/183.6 million lbs) for Jan vessel loading windows. Jan will be the first full month that the new 30,000 mt (66 million lb) refrigerated storage tank will be in service at the joint-venture Enterprise Navigator Ethylene Terminal at Morgan's Point on the Houston Ship Channel. The new tank will allow for increased throughput at the terminal.

Downstream, Formosa announced the startup of its LDPE unit at Point Comfort, TX on Monday, Nov 30. The newly formed Sasol/LyondellBasell joint venture, Louisiana Integrated Polyethylene, was also in the process of ramping up production at a new LDPE unit at Lake Charles, LA at the beginning of Dec.

The increased downstream demand coupled with consistent healthy spot ethylene export cargoes created a strain on the relatively strong ethylene supply resulting in an increase in prices in Dec and continued to play a factor in Jan.

Another fundamental came into play in Jan – short covering of previously traded forward markets that are coming due is further exacerbating the scramble to find ethylene pounds.

DOWNSTREAM MARKETS

The US PE market has started the year with snug supply and very limited spot offers. Resin brokers said that they had more inquiries for product than they had offers from producers. Tight supply is expected to ease later in 1Q as production outages are resolved and demand from Asia weakens.

Braskem-Idesa has restarted a portion of its 1.05 million mt/yr HDPE/LDPE plant in Nanchital, Veracruz, Mexico, but it remains to be seen when the plant will be able to fully resume operations. Formosa has reportedly resumed operations at its 340,000 mt/yr HDPE BM unit in Point Comfort, TX following a maintenance outage that began in Nov 2020 and was extended by mechanical issues in Dec.

PE export prices increased by as much as 8 cpp for Jan shipments. As of Monday, Jan high density polyethylene for blow molding (HDPE BM) was at 51 cts/lb railcar FOB Houston, up from 43-46 cts/lb in Dec. Jan linear low density polyethylene (LLDPE) butene film was at 46 cts/lb railcar FOB Houston, up from 38-42 cts/lb in Dec.

PVC contract prices rose by a net 16 cpp in 2020 through Oct, due to a combination of increased ethylene feedstock costs and tight resin availability due to EDC and VCM (PVC feedstocks) production problems. Ethylene makes up only about 48% of the PVC molecule but is considered a major price driver, as chlorine is a captive product and pricing into PVC seldom moves.

The large jumps in ethylene pricing in Dec and Jan have resulted in price increase announcements from PVC suppliers of 4 cpp for Jan and 3 cpp for Feb. Of the total 7 cpp announced for those two months, at least 5 cpp is predicted to go through.

Upward pressure from ethylene is expected to continue in 2021. The market anticipates that this pressure will be moderated when Shintech brings on a new PVC plant at Plaquemine, LA with a capacity of 640 million lbs/yr. The plant was originally scheduled to come online in 4Q 2020 but was delayed to the end of 1Q 2021 due to the COVID-19 pandemic and its effect on construction staffing. The plant’s startup has now been delayed until the end of 2Q 2021.

--Reporting by Julia Giordano (julia@petrochemwire.com); David Barry (david@petrochemwire.com); Donna Todd (donna@petrochemwire.com);

--Editing by Joe link (joe@petrochemwire.com)

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Shell shuts furnaces at Deer Park's OL-3 olefins unit

January 6, 2021

Shell Chemicals has shut the furnaces at its OL-3 olefins plant at Deer Park, Texas in an effort to stop emissions and flaring at the unit. The unit flared for 16 hours on Tuesday, according to a TCEQ filing, following an unspecified process upset. The plant's ethylene capacity is 1.8 billion pounds per year, or nearly 5 million pounds per day.

The outage brings maximum steam cracker operating rates in Texas down to 89%. Two olefins units at Formosa Plastics' Point Comfort site in Texas remain shut. Louisiana steam cracker operating rates have been above 95% with only one olefins plant down (Indorama's plant at Lake Charles).

Spot ethylene prices began soaring in November, rising from the 19-20 cts/lb range at the three main hubs (NOVA and Enterprise at Mont Belvieu, Texas and Choctaw in Louisiana) to above 30 cts/lb by the end of December. Prices have continued rising in January, breaking above 40 cts/lb this week at the NOVA and Choctaw hubs.

In addition to continued strong demand from downstream marketing including polyethylene, PVC and styrene, spot export activity has been brisk with eight ethylene cargoes loading from Houston in December and another eight scheduled to load in January. Most cargoes were bound for Asia; two in January are scheduled to go to Europe. Ethylene cargoes are typically between 9,000 and 11,5000 metric tons (mt). Spot export volume from Houston totaled nearly 90,000 mt and January volume has totaled closer to 80,000 mt.

--Reporting by Julia Giordano, julia@petrochemwire.com 

--Editing by Kathy Hall, kathy@petrochemwire.com

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Enterprise-Navigator JV Commissions New Tank, Benefits Ethylene Exports

December 29, 2020

Ethylene exports from the U.S. Gulf Coast are expected to receive a boost after the commissioning of a 30,000 mt (66 million lb.) refrigerated storage tank at the joint-venture Enterprise Navigator Ethylene Terminal at Morgan’s Point on the Houston Ship Channel.

Enterprise Products Partners operates the terminal as part of its 50-50 joint venture arrangement with ship owner Navigator Holdings.

In a press release issued Tuesday morning, Enterprise Co-CEO Jim Teague said, “Our fully commissioned Morgan’s Point ethylene export facility is the largest and most reliable supply source for waterborne ethylene in the world… The terminal is backed by the supply of the entire U.S. Gulf Coast via our growing ethylene midstream services, which include our open access storage and market hub in Mont Belvieu.”

David Butters, Executive Chairman of Navigator Holdings commented in the press release, “The commissioning of the Morgan’s Point terminal in the face of a yearlong pandemic is testimony to the high-quality talent and dedicated team assigned to this project…We expect the terminal to operate at capacity, utilizing Enterprise’s vast interconnected ethylene platform, and to create strong demand for Navigator's fleet of specialized ethylene capable vessels.”

The companies noted that the Navigator Atlas became the first vessel to utilize the new service at Morgan’s Point on December 23, 2020.

The storage tank is the final component of the ethylene export system, which comprises salt dome storage in Mont Belvieu and pipeline connectivity to the waterfront. Navigator executives said in a November conference call that the tank was expected to be commissioned and the first ethylene tons loaded in it in mid-December. Committed offtake agreements with minimum contractual terms of five years would then push the terminal’s annual throughput to about 940,000 mt (2.06 billion lb), close to the nameplate of 1 million mt/yr (2.2 billion lb/yr), the company stated.

The Morgan’s Point terminal became the flagship of ethylene exports from Houston when it started operations in January 2020. Navigator said last month the facility reached 90% utilization over the summer.

According to OPIS PetroChem Wire data, five spot vessels were loaded at the facility in June for a total of 66,500 mt (146.61 million lb). In July, a total of nine spot vessels were loaded, totaling 79,200 mt (174.6 million lb) – the highest month for spot ethylene export volumes at the terminal thus far.

Spot ethylene exports dropped after Hurricanes Laura and Delta hit the U.S. Gulf Coast in August and October. However, cargoes started to ramp back up in November with five spot vessels loaded (47,500 mt/104.72 million lb). An additional five were scheduled for December laycans at the time of this writing (57,500 mt/126.76 million lb).

Trade interests are monitoring the January loading program for clues on how much further export volumes would ramp up. Enterprise has previously stated that once the storage tank is commissioned, the terminal would be able to load ethylene up to a rate of 2.2 million lb/hr.

Enterprise commissioned the related ethylene storage hub earlier this year. The 272,700 mt (600 million lb.) salt dome cavern storage well in Mont Belvieu, Texas, some 16 miles east of Morgan’s Point, is connected to the export terminal via pipeline.

Pricing at the new Enterprise ethylene hub in Mont Belvieu (MtB-EPC) started in April 2020 with the spot ethylene market at historic lows. At the time, global commodity markets were struggling with COVID-19 effects on demand. The first in-well trade was seen at 8.5 cts/lb on April 9. Fast forward to the end of December when the ethylene market is seeing high prices for the year. MtB-EPC ethylene has been bid up to 32 cpp.

The new ethylene hub is structured similar to Enterprise’s propylene and NGL systems with a focus on accessibility for the market.

“The truth is, now anyone can participate in our open-access markets. The benefits of these world-scale assets are available to the entire market through our Mont Belvieu storage, transportation or production opportunities,” said Enterprise Co-CEO Jim Teague in a recent interview with OPIS PetroChem Wire.

 

--Reporting by Julia Giordano, julia@petrochemwire.com, Rajesh Joshi, rjoshi@opisnet.com

--Editing by Kathy Hall, kathy@petrochemwire.com

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Discussion with Enterprise Products about Historic Moment for Ethylene

December 21, 2020

The year 2020 was significant in the evolution of the US Gulf Coast ethylene market due to the opening of the new Enterprise Products (Enterprise) ethylene storage facility and joint venture ethylene export terminal.

The commissioning of the Enterprise ethylene storage hub in Mont Belvieu, Texas in early 2020 marked the opening of the third major trading hub for the product along the US Gulf Coast. In addition to the ethylene storage hub, the joint venture Enterprise Navigator Ethylene Terminal was commissioned in January of 2020 at Morgan’s Point, Texas along the Houston Ship Channel. The Enterprise Navigator Ethylene Terminal was not the first to export ethylene from the US Gulf Coast. However, the new terminal is the first open-access ethylene export facility in the US, giving international companies the opportunity to connect the US with global ethylene markets.

OPIS PetroChem Wire spoke to Jim Teague, Co-CEO and Chris D’Anna, SVP Petrochemicals from Enterprise to learn more about the new ethylene system and hear the company’s perspective on the future growth of the US ethylene market as it expands into the global marketplace.

Click here to read the full interview with Enterprise Products and learn more about the evolution of the US Gulf Coast ethylene market.

--Reporting by Julia Giordano, julia@petrochemwire.com
--Editing by Kathy Hall, kathy@petrochemwire.com

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Ethylene Pricing Reaches New Highs for 2020

December 15, 2020

Ethylene pricing reached annual highs in early Dec and continues to rise across all three major storage hubs.

Dec started with prompt MtB-NOVA ethylene priced at 22.5 cts/lb, MtB-EPC ethylene at 23.5 cts/lb and Choctaw ethylene at 24.25 cts/lb.

By the end of the first week, ethylene at the NOVA hub had increased 22% to 27.5 cts/lb – already surpassing its previous high for the year of 26.5 cts/lb. Pricing at the Enterprise hub went up 16% to 27.25 cts/lb; its previous annual high had been 27 cts/lb. The Choctaw hub saw an 18% increase to 28.5 cts/lb.

Prices moved up even further by the end of week two. MtB-NOVA increased by 3 cts/lb to 32 cts/lb in the front month, representing a 42% increase from Dec 1 pricing. MtB-EPC’s value increased 2 cts/lb to 29.5 cts/lb (26% higher than the first of the month). Choctaw ethylene was up an additional 2.75 cts/lb, also landing at 32 cts/lb. This reflects a 32% increase from the beginning of the month.

Moreover, the latest increases in the front month at the MtB-NOVA and Choctaw hubs were led by Jan MtB-NOVA trading activity.

Last Wednesday, Dec 2, Jan MtB-NOVA ethylene traded up to 29.5 cts/lb late in the day. The Dec/Jan MtB-NOVA spread was bid at 2.5 cts/lb backwards, thus giving Dec an implied value of 32 cts/lb. This was 3 cts/lb higher than Dec MtB-NOVA’s last traded level of 29 cts/lb on the Dec 7.

That same day, the Dec Choctaw/MtB-NOVA ethylene spread traded at parity. Therefore, when the implied value of Dec MtB-NOVA ethylene moved up to 32 cts/lb, the implied value of Dec Choctaw ethylene moved up to 32 cts/lb, as well.

Prior to Dec, ethylene’s previous highs for the year were seen in the wake of Hurricane Laura’s landfall near Lake Charles, LA on August 27. Choctaw ethylene reached 31 cts/lb on Sep 21. In Mont Belvieu, NOVA pricing was as high as 26.5 cts/lb on Sep 1, and Enterprise pricing followed suit by increasing up to 27 cts/lb on September 25. Hurricane Delta made landfall on Oct 9 not far from Laura’s path. According to OPIS PetroChem Wire data, operating rates were down to 69% in the US Gulf Coast at the peak of the storm outages.

Prices at all three ethylene hubs dropped below 20 cts/lb in Nov as supply stabilized following the restart of facilities shutdown due to Hurricanes Laura and Delta. By early Nov, estimated maximum US Gulf Coast steam cracker operating rates were back up to 95%.

While supply remained relatively strong, ethylene demand increased as spot ethylene exports strengthened and downstream production came online.

Six spot ethylene cargoes were scheduled to leave the Houston Ship Channel in Nov (60,000 mt/132.3 million lbs). By the second week in Dec, eight cargoes were already scheduled (89,800 mt/197.97 million lbs) for Dec vessel loading windows. This compares to just three spot ethylene vessels departing the Houston Ship Channel in Oct (28,000 mt/92.6 million lbs).

Downstream, Formosa announced the startup of its LDPE unit at Point Comfort, TX on Monday, Nov 30. The facility’s Olefins I unit is understood to have just extended its estimated downtime from a turnaround that started this past Mar. The newly formed Sasol/LyondellBasell joint venture, Louisiana Integrated Polyethylene, was also in the process of ramping up production at a new LDPE unit at Lake Charles, Louisiana.

Domestic PE demand has been resilient during the pandemic as consumer spending habits have shifted toward more packaged goods. PE export demand has also accelerated in Nov and Dec, with the US dollar slumping and Asia PE markets, especially China, showing strength.

Strong export demand and limited supply helped push Houston railcar spot prices higher last week: high density polyethylene (HDPE) for blow molding rose to 44 cts/lb FOB Houston after dipping as low as 41-42 cpp in late Nov. Linear low density polyethylene (LLDPE) butene film grade for export also lifted 1 cent last week, to 39 cts/lb FOB Houston from 38 cts/lb.

PVC contract prices had risen by 16 cts/lb through Oct, due to a combination of ethylene price increases, hurricane shutdowns and production problems. The Nov PVC contract net transaction prices will settle flat, leaving pipe grade at 55-57 cts/lb and general purpose grade at 59-62 cts/lb. OxyVinyls, Formosa and Westlake had all announced 3 cts/lb price increases for Dec, but Shintech pushed its 3 cts/lb PVC price increase to Jan 1. This announcement will effectively pull the Dec announcements of the other three suppliers forward to Jan, leaving PVC producers to fight for a rollover for Dec. This week, Formosa announced a 4 cts/lb price increase effective Jan 1, stipulating in its letter to customers that this was in addition to its previously announced 3 cts/lb price increase. Market participants expect that if competitors follow with 4 cts/lb price hikes of their own, the effective date will be shifted to Feb 1.

--Reporting by Julia Giordano julia@petrochemwire.com , David Barry david@petrochemwire.com and Donna Todd donna@petrochemwire.com

--Editing by Joe link joe@petrochemwire.com  

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Propylene Prices Reach New High-Water Marks for the Year

December 15, 2020

Propylene prices reached new high-water marks for the year amid ongoing supply issues and a stronger pull from the downstream market.

Dec MtB-EPC polymer grade propylene (PGP) started the month at 42.5 cts/lb. By the end of week one, Dec PGP increased 13% to 48 cts/lb. PGP pricing shot up an additional 4.5 cts/lb to 52.5 cts/lb by the end of week two, representing a 24% increase from the first of the month.

Previously, MtB-EPC PGP had reached a high price for the year of 39 cts/lb on Jul 28. At the time, overall maximum propane dehydrogenation (PDH) unit operating rates were estimated at 48.65% month to date for Jul, according to OPIS PetroChem Wire data. Operational issues were reported at all three US Gulf Coast PDH units that month – Dow at Freeport, TX; Enterprise Products at Mont Belvieu, TX; and Flint Hills Resources at Houston, TX.

Moreover, spot PGP exports had come to a complete halt that month, with no vessels confirmed for Jul compared to three spot vessels in both May and Jun.

Dec MtB-EPC refinery grade propylene (RGP) was assessed at 21 cts/lb on Dec 1. It increased by 24% to 26 cts/lb by the end of the first week after trading at that level. By the end of week two, Dec RGP was bid up to 28.25 cts/lb. This is 35% higher from the start of Dec.

Earlier in the year, RGP had reached a high of 20.25 cts/lb on Sep 2. This was shortly after Hurricane Laura made landfall near Lake Charles, LA, impacting the refineries in the area (CITGO and Phillips 66).

The spread between RGP and PGP was at 24.25 cts/lb by market close on Dec 11. It had reached 25 cts/lb earlier in the week last week but shrank as RGP was bid higher on Friday and PGP was quiet. Though 25 cts/lb is a wide spread between the two products, the peak for the year was seen on July 28 at 27 cts/lb when PGP prices spiked due to PDH unit outages. From Jul 10-31, RGP prices held flat at 12 cts/lb while PGP increased from 31.25 to 39 cts/lb. Thus, demonstrating that even though RGP is the feedstock for PGP at the splitters, the increase of on-purpose PGP production from PDH units has decreased the correlation between the two products along the US Gulf Coast.

RGP is a by-product of vacuum gasoil inputted to fluid catalytic crackers, a major producer of gasoline at a typical US Gulf Coast refinery. According to monthly data released last week by the US Energy Information Administration (EIA), FCC inputs have been radically reduced.

Through Sep of this year, the average input of VGO to an FCC in PADD 3 was 2,097,000 b/d, compared to 2,493,000 b/d for the entire year of 2019 or 2,603,000 b/d for 2018.

From Apr (the beginning of the COVID-19 lockdown) through Sep, the FCC input for PADD 3 is 2,058,000 b/d; the figure for 2019 is 2,508,000 b/d.

According to EIA data for the week ended Dec 4, estimated refinery operable utilization rates in PADD 3 were 80.6%, compared to 93.3% last year, reflecting refinery reductions that continue to linger following the decrease in fuel demand caused by COVID-19.

Moreover, Shell began the permanent shutdown of its Convent, LA refinery on Monday, Nov 30. The Shell Convent capacity being closed includes a 92,300 b/d FCC unit that supplies RGP to the US Gulf Coast pipeline network.

The decrease in RGP supply is furthering an already tight RGP railcar market. Over the past two weeks, Dec Louisiana railcar RGP was bid at index plus 5 cts/lb against no offers. Dec TX-Other railcar RGP traded at 32 cts/lb and then at 32.5 cts/lb, representing a 5-6 cts/lb premium to MtB-EPC pipeline RGP at the time of the trades.

With a decrease in refinery rates comes a decrease in RGP supply headed for propylene splitters, therefore reducing available PGP supply. On-purpose PGP production was impacted over the past two weeks as well due to operational issues at the Enterprise Products PDH unit at Mont Belvieu, TX.

Downstream, polypropylene (PP) market participants saw tight supply continuing well into 1Q 2021, driven by strong demand from a variety of applications including automotive parts and personal protective equipment (PPE).

“There is not enough propylene for everyone to run. Everyone is trying to run hard,” a buyer observed of the PP producers.

One PP supplier has been notifying traders that it does not expect to have incremental (spot) availability until 2Q; other suppliers have said they are sold out at least through December.

In addition to availability concerns, there is speculation that PP contract prices could rise by nearly double digits this month. PP contract prices typically follow the monomer contract market, which appears headed for a significant increase this month, and PP suppliers are pursuing a 4 cts/lb margin increase on top of any change due to monomer.

A large December PP price increase could dampen demand and increase the flow of imported resin and finished goods. However, import options may be limited because global PP markets appear tight at the moment, and a shortage of vessel space and equipment from Asia and the Mideast has driven freight costs to the US and Latin America sharply higher.

--Reporting by Julia Giordano julia@petrochemwire.com , David Barry david@petrochemwire.com and Robert Sharp robert@petrochemwire.com

--Editing by Joe link joe@petrochemwire.com 

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Ethylene Prices Increase as Market Adjusts to New Demand

December 7, 2020

Ethylene prices saw a sharp increase last week as spot ethylene exports strengthened and downstream production came online.

The month started on Tuesday with Dec MtB-NOVA ethylene at 22.5 cts/lb, Dec MtB-EPC ethylene at 23.5 cts/lb and Dec Choctaw ethylene at 24.25 cts/lb. By week’s end, ethylene at the NOVA hub had increased 22% to 27.5 cts/lb. Pricing at the Enterprise hub went up 16% to 27.25 cts/lb, and the Choctaw hub saw an 18% increase to 28.5 cts/lb.

According to OPIS PetroChem Wire data, estimated maximum US Gulf Coast steam cracker operating rates have been holding relatively steady at 95% since Nov 1. This comes after a little more than two months of sustained cracker shutdowns and reduced rates in the Lake Charles, LA area following Hurricanes Laura and Delta. Operating rates were down to 69% in the US Gulf Coast at the peak of the outages.

Spot ethylene export volumes declined as a result of the cracker outages caused by the hurricanes. August saw five vessels (49,000 mt/108 million lbs) followed by three vessels in Sep (42,000 mt/92.6 million lbs). Only 28,000 mt (92.6 million lbs) moved across the docks on a spot basis in Oct on three separate vessels.

As supply came back online after the storms, spot ethylene exports increased. Six spot cargoes were scheduled for Nov (60,000 mt/132.3 million lbs). By the first week in Dec, seven were already scheduled (80,500 mt/177.5 million lbs) for Dec vessel loading windows. This compares to the previous monthly high for the year in July of 11 spot ethylene vessels totaling 99,200 mt (218.7 million lbs).

Downstream, Formosa announced the startup of its LDPE unit at Point Comfort, TX on Monday, Nov 30. This comes while its Olefins I unit at the same facility remains shut for a turnaround that started in Mar – furthering the strain on the relatively strong ethylene supply. The newly formed Sasol/LyondellBasell joint venture, Louisiana Integrated Polyethylene, was also in the process of ramping up production at a new LDPE unit at Lake Charles, Louisiana.

Domestic PE demand has been resilient during the pandemic as consumer spending habits have shifted toward more packaged goods. PE export demand has also accelerated in Nov and Dec, with the US dollar slumping and Asia PE markets, especially China, showing strength.

Strong export demand helped propel Houston railcar spot prices higher last week: high density polyethylene (HDPE) for blow molding rose to 43 cts/lb FOB Houston from 42 cts/lb. Linear low density polyethylene (LLDPE) butene film grade for export also lifted 1 cent last week, to 38 cts/lb FOB Houston from 37 cts/lb.

PVC contract prices had risen by 16 cpp through Oct, due to a combination of ethylene price increases, hurricane shutdowns and production problems. The Nov PVC contract price will settle flat. OxyVinyls, Formosa and Westlake had all announced 3 cpp price increases for Dec, but the initiative was stalled waiting for Shintech to follow. Today, Shintech announced that it will be raising its PVC prices by 3 cpp, effective Jan 1. This announcement will effectively pull the Dec announcements of the other three suppliers forward to Jan, leaving PVC producers to fight for a rollover for Dec.

-- Reporting by Julia Giordano julia@petrochemwire.com ; David Barry david@petrochemwire.com ; Donna Todd donna@petrochemwire.com  

-- Editing by Joe link  joe@petrochemwire.com  

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Propylene Prices Rise Sharply Amid Reduced Supply and Increased Demand

December 7, 2020

Propylene prices increased significantly this week amid supply issues and a stronger pull from the downstream market.

The month started on Tuesday with Dec MtB-EPC polymer grade propylene (PGP) at 42.5 cpp and Dec MtB-EPC refinery grade propylene (“RGP”) at 21 cpp. By week’s end, PGP increased 13% to 48 cpp and RGP shot up 24% to 26 cpp.

RGP is a by-product of vacuum gasoil inputted to fluid catalytic crackers, a major producer of gasoline at a typical US Gulf Coast refinery. According to monthly data released last week by the US Energy Information Administration (EIA), FCC inputs have been radically reduced.

Through Aug of this year, the average input of VGO to an FCC in PADD 3 was 884,000 b/d, compared to 999,000 b/d for the entire year of 2019 or 1,061,000 b/d for 2018.

FCC inputs for PADD 3 from Apr (the beginning of the COVID-19 lockdown) through Aug totaled 842,000 b/d.

According to EIA data, estimated refinery operable utilization rates were near 78%, reflecting refinery reductions that continue to linger following the decrease in fuel demand caused by COVID-19.

Moreover, Shell began the permanent shutdown of its Convent, LA refinery on Monday, Nov 30. The Shell Convent capacity being closed includes a 92,300 b/d FCC unit that supplies RGP to the US Gulf Coast pipeline network.

The decrease in RGP supply is furthering an already tight RGP railcar market. Last week, Dec railcar RGP was bid at index plus 5 cpp.

With a decrease in refinery rates comes a decrease in RGP supply headed for propylene splitters, therefore reducing available PGP supply. On-purpose PGP production was impacted last week as well due to operational issues at the Enterprise Products PDH unit at Mont Belvieu, TX.

Downstream, polypropylene (PP) market participants saw tight supply continuing well into 1Q 2021, driven by strong demand from a variety of applications including automotive parts and personal protective equipment (PPE).

“There is not enough propylene for everyone to run. Everyone is trying to run hard,” a buyer observed of the PP producers.

One PP supplier has been notifying traders that it does not expect to have incremental (spot) availability until 2Q; other suppliers have said they are sold out at least through December.

In addition to availability concerns, there is speculation that PP contract prices could rise by nearly double digits this month. PP contract prices typically follow the monomer contract market, which appears headed for a significant increase this month, and PP suppliers are pursuing a 4 cpp margin increase on top of any change due to monomer costs.

A large Dec PP price increase could dampen demand and increase the flow of imported resin and finished goods. However, import options may be limited because global PP markets appear tight at the moment, and a shortage of vessel space and equipment from Asia and the Mideast has driven freight costs to the US and Latin America sharply higher.

--Reporting by Julia Giordano julia@petrochemwire.com  ; David Barry david@petrochemwire.com ; Robert Sharp robert@petrochemwire.com  

--Editing by Joe Link joe@petrochemwire.com  

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Braskem-Idesa shuts down due to natural gas supply disruption

December 2, 2020

The Braskem-Idesa ethylene-polyethylene joint venture has received notice from Mexico's natural gas pipeline authority regarding the unilateral termination of natural gas transportation, Braskem said on Wednesday.

"As a result, in compliance with safety protocols, Braskem Idesa initiated procedures for the immediate interruption of its operating activities, which may have a material effect on the Company's operating or financial results, depending on the timing of the stoppage," Braskem said in a statement.

The company said it would take legal measures to resolve the issue, but it could not estimate the date for the return of its activities.

The Braskem Idesa complex, which comprises one ethane cracker and three PE units (total PE capacity: 1.05 million mt/yr), had a utilization rate of 84% in 3Q 2020, according to a recent Braskem presentation. The main grades of PE produced are high density PE (HDPE) for blow molding and film, and low density PE (LDPE) for film.

The outage was seen as supportive of US PE prices. Braskem-Idesa exports some of its production into the US and competes with US manufacturers in Latin America.

The Houston railcar market for HDPE blow mold was trading at 42-44 cts/lb FOB this week, with traders seeing limited availability and upward pressure. There was an isolated report of bids at 45 cpp railcar FOB Houston.

LDPE film, which is also produced by Braskem-Idesa, was perceived as tight in the Houston railcar market, with traders placing unsuccessful bids at 50 cts/lb FOB. The US LDPE export market has been boosted by strong demand from Asia, particularly China, in recent weeks. Bids from China have surpassed $1350/mt (61.2 cts/lb) CFR China Main Port this week.

--Reporting by David Barry, david@petrochemwire.com
--Editing by Joe Link, joe@petrochemwire.com

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US Gulf Coast Ethylene Exports Rebound as Crackers Return to Service

November 30, 2020

Exports of ethylene from the U.S. Gulf Coast are recovering from a trough caused by Hurricanes Laura and Delta, which had sidelined a significant proportion of regional steam cracker capacity and reduced ethylene output.

The revival comes as Navigator Holdings hinted at its quarterly conference call on Friday of a potential expansion of the joint venture export terminal on the Houston Ship Channel the company owns with Enterprise Products Partners.

This terminal became the flagship of Gulf Coast ethylene exports when it started operations in January, adding to limited volumes being shipped from Targa's docks.

OPIS PetroChem Wire statistics project combined Gulf Coast spot ethylene exports for November at 53,500 tons. The Enterprise-Navigator ethylene terminal accounts for 41,000 tons of this total.

The November figure improves over the October spot export total of 28,000 tons (including 16,500 tons from Enterprise-Navigator), that followed 42,000 tons in September (30,500 tons from the terminal) and 49,000 tons in August (43,500 tons from the terminal).

The slowdown in September and October came after Hurricane Laura made landfall in the Lake Charles area in Louisiana at the end of August, followed by Hurricane Delta in early October, covering a region that holds one-fourth of U.S. ethylene production. Prolonged outages in the area's power grids kept multiple crackers out of operation. At the peak of these outages, around 40% of the total Gulf Coast ethylene cracker capacity of around 228 million lbs./day was offline.

"As a direct consequence," Navigator's third-quarter results statement lamented, throughout at the export terminal was reduced, pushing some Navigator ships ballasting into the region in hopes of their next ethylene cargoes out of their slots and forcing them to compete for LPG cargoes.

Hurricane delays now are largely contained. OPIS PetroChem Wire data show all units impacted by the storms have resumed operations, with two exceptions: DowDuPont's 1.5 billion lb./yr. unit in Orange, Texas, which is understood to be in turnaround; and Indorama's 0.82 billion lb./yr. unit in Lake Charles, which remains shut following an Aug. 1 lightning strike and is not expected back online until the first quarter of 2021.

In addition to the cracker outages from the storms, NOVA's 1.95 billion lb./yr. cracker in Geismar, Louisiana, went down unexpectedly for a month starting in mid-September due to a power outage. BASF-Total's 2.3 billion lb./yr. cracker in Port Arthur, Texas, was down from mid-June to late-October due to compressor issues, and Formosa's 1.5 billion lb./yr. Olefins-I unit in Point Comfort, Texas, has been down since March 21 for turnaround. These outages further exacerbated the recent ethylene supply shortage.

With sidelined crackers now back, an industry source told OPIS Gulf Coast demand for ethane as a feedstock is back to the usual 1.8 million b/d "or perhaps even higher." The expert does not believe this will lift the spot Mont Belvieu ethane price immediately from the low-20cts/gal range at which it remains mired, because cracker outages have created an ethane supply overhang along the Gulf Coast that needs to be drained first.

However, he believes ethylene prices could catch a tailwind if the export bounce is sustained.

Spot ethylene at the Choctaw hub in Louisiana assessed by OPIS PetroChem Wire increased from 12.75cts/lb. in early August to 22.5cts/lb. in the days immediately following Hurricane Laura. Louisiana ethylene increased even further to 31cts/lb. in late September, before settling down to 17.75cts/lb. in early November.

However, Choctaw ethylene had rallied to 22cts/lb. as of market close on Nov. 16.

At the Enterprise hub in Mont Belvieu, Texas, where ethylene is purchased for export, prices increased from 19cts/lb. in early August to 26.5cts/lb. shortly after Hurricane Laura. The hub peaked at 27cts/lb. at the end of September before settling in the low-to-mid 20s cts/lb. for the month of October. Pricing decreased to 18.5cts/lb. this month following the stabilization of supply after an active hurricane season, but on Nov. 16 had recovered to 20cts/lb.

Navigator reported last week the export terminal had reached 90% utilization over the summer. OPIS PetroChem Wire data show this location has exported 340,600 tons year to date on a spot basis. The company's third-quarter financials reported the 30,000-ton storage tank at the export terminal is being commissioned and expected to be operational in December. Once this phase is online, previously contracted volumes would push the terminal's annual throughput to about 940,000 tons, the company stated.

Executives at the conference call said Navigator was open to searching for more capital to expand the terminal, "if things go as anticipated and volumes ramp up."

--Reporting by Rajesh Joshi, rjoshi@opisnet.com, Julia Giordano, julia@petrochemwire.com

--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com

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Sasol to Sell its Share of US Polyethylene Joint Venture

November 30, 2020

Sasol and Ineos have agreed on principle terms for Ineos to assume 100% ownership of the Gemini joint venture high density polyethylene (HDPE) plant in La Porte, TX.

The $404 million transaction is expected to close on Dec 31. In a statement, Sasol said its exit from the Gemini JV represents a further step in achieving Sasol’s strategic and financial objectives by accelerating the focus on specialty chemicals and reducing net debt.

Parallel to the Gemini sale, Sasol is within weeks of closing on a $2 billion transaction with LyondellBasell that will transfer half ownership and all operational responsibility for its 1.5 million mt/yr Lake Charles, LA ethane cracker and two downstream PE plants (total capacity: 900,000 mt/yr).

The 470,000 mt/yr Gemini plant, which started up in 2017, produces bimodal HDPE on a single train using Innovene process technology. Bimodal HDPE is commonly used in pressure pipe and film applications.

The transaction will remove a competitor from the marketplace for both HDPE pipe and film, so this good news for Ineos and sellers in general, noted Joel Morales, Executive Director for Polyolefins-Americas at IHS Markit.

The companies currently market their own shares of the plant’s output. Ineos has a large outlet for HDPE pipe grades through its WL Plastics subsidiary, which it acquired in 2016, while Sasol has focused more on serving the film market.

Sasol had expended considerable effort getting certifications for its pipe grades, Morales said. WL Plastics operates eight facilities with over 750 million pounds (340,200 mt) of annual pipe capacity, according to its website.

“The product mix is likely to stay the same to minimize transitions and wide spec production,” said Morales. “Ineos only has so much pipe demand in the local market with their integration through WL, so they will manage between the two products to optimize profitability.”

With seasonally slower HDPE pipe demand in place, bimodal HDPE producers have shifted output more toward film grades, which has brought more supply pressure to the high molecular weight PE (HMWPE) film market in recent weeks, according to market participants.

HMWPE film spot export prices were seen last week at 37-38 cts/lb railcar FOB Houston, compared with 44 cts/lb as recently as mid-October, according to OPIS PetroChem Wire price data.

The price decline for HMWPE film outpaced HDPE blow molding grade, which has traded from 45 cts/lb railcar FOB Houston down to 42 cts/lb in the same period.

--Reporting by David Barry, david@petrochemwire.com

--Editing by Joe Link, joe@petrochemwire.com

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US polypropylene imports reached six-month high in September: Commerce Department

November 4, 2020

US polypropylene (PP) imports (including propylene copolymers) totaled 64.3 million pounds in September, a 50% increase from 42.7 million pounds the prior month and the highest level since March 2020, according to the latest Commerce Department figures released today.


PP imports were nearly evenly split between homopolymer PP (HoPP) and copolymers, with 32.9 million pounds of the former, and 31.5 million pounds of the latter.

Singapore and South Korea contributed the largest increases in import cargoes. Volume from Singapore, 95% of which was copolymer, was up 9.4 million pounds at 13.1 million pounds, while Korea-origin volume was up 5.3 million pounds at 11.6 million pounds.

The uptick in imports comes amid tight supply conditions that have emerged since mid-year in the North American PP markets. Industry operating rates were reported in the mid-80s percent during 3Q, while demand was closer to a 90 percent run rate equivalent.

Also, US prices have been elevated relative to the global market. The spread between the Houston railcar spot price and the Southeast Asia spot price for HoPP raffia grade ranged from 4.4-6.2 cts/lb during September, according to OPIS PetroChem Wire data. That represents a roughly 10 cts/lb shift from two months earlier, when US pricing was about 5 cts/lb below that of Southeast Asia.

Currently, HoPP raffia is assessed at 52.5 cts/lb railcar FOB Houston, which traders do not consider workable for the export market. Spot export offers have been scarce for months, as suppliers have focused on meeting domestic demand.

US September PP exports totaled 325.3 million pounds, 79% of which was destined for Mexico or Canada. It was the lowest monthly export volume since May 2020.

Three US PP producers—Formosa, LyondellBasell and Ineos—continue to operate under force majeure declarations in November. Other suppliers are struggling to rebuild inventories to normal levels and have notified customers that they do not expect to have incremental volumes of prime resin until January 2021.

 

--Reporting by David Barry, David@petrochemwire.com;

--Editing by Joe Link, Joe@petrochemwire.com 

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Sasol commencing startup of Lake Charles, LA complex after Hurricane Delta

October 22, 2020

Sasol’s Lake Charles, Louisiana complex now has sufficient industrial-level power restored after Hurricane Delta and has commenced a coordinated startup of the complex, the company said Thursday.

The company suspended operations as a precautionary measure due to Hurricane Delta, which made landfall on October 9; preliminary assessments indicated no further damage after the hurricane.

Seven chemical manufacturing units at the Lake Charles site have since returned to operation, and all remaining units are expected to restart by the end of October.

Sasol said it suffered a production hit of 170,000 mt in 3Q (its fiscal first quarter) due to Hurricane Laura, which came ashore on August 27 and caused extended disruption to the site’s power supply.

The storm's effect on spot ethylene pricing in the Louisiana market was notable, according to OPIS PetroChem Wire data. Prompt ethylene at the Choctaw hub moved up from 16.5 cts/lb shortly ahead of Laura's landfall to 31 cts/lb by the end of September. As units slowly began restarting, prices have eased in October to 27 cts/lb, but the appetite for spot material has kept them supported at this level.

The site’s larger 1.5 million mt/yr cracker, referred to as the west cracker, recorded gross ethylene production of 217,000 mt in calendar 3Q, up from 44,000 mt a year earlier (the cracker achieved beneficial operations in August 2019). The smaller, older east cracker had gross ethylene production of 67,000 mt in 3Q 2020, down from 113,000 mt a year earlier.

Sasol’s Lake Charles polyethylene (PE) production volumes in 3Q totaled 132,000 mt in the storm-affected 3Q 2020, down 41,000 mt from 173,000 mt a year earlier.

The company’s 3Q US polymers basket prices, including ethylene, co-products, linear low density polyethylene (LLDPE) and high density polyethylene (HDPE), were up 12% from the prior quarter at $551/mt (25 cts/lb). However, ethane costs rose by 15% quarter over quarter to an average price of 22 cts/gal ($162/mt), according to Sasol’s quarterly financial statement.


Earlier this month, Sasol announced plans to divest half of its LCCP Base Chemicals business, which includes the west cracker and the two downstream PE units, by forming a joint venture with LyondellBasell. That transaction is expected to close later this year.


Sasol will retain full ownership and operation control of the east plant ethane cracker and eight other units on the site, including manufacturing units for Ziegler and Guerbet alcohols, alumina, ethylene oxide and derivatives, paraffins, linear alkyl benzene and alpha olefins.

Sasol also has a US phenolics business and a joint venture HDPE plant.

 

--Reporting by David Barry, david@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

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FG Defers Major Construction on Louisiana Petrochemical Plant Amid Pandemic

October 21, 2020

FG LA LLC (FG) has deferred major construction on its proposed Louisiana olefins complex until the pandemic has subsided or an effective vaccine is widely available, a company spokesperson confirmed today. FG is a subsidiary of Formosa Plastics Group.

“The widespread impacts of a global pandemic, including the challenge it creates in evaluating construction costs and the restrictions it has placed on international travel, are being felt across all industries and businesses, including FG,” the company said.

The project, which is still awaiting a final investment decision, would be built in two phases, according to FG’s website. The proposed first phase includes an ethane cracker, propane dehydrogenation (PDH) unit and associated derivatives plants. The second phase includes an ethane cracker and natural gas-fired power plant.

The company’s statement on Tuesday noted that activities will continue throughout the second half of 2020, including widening a highway adjacent to the site, utility relocations, soil testing, placement of test piles and a pipeline removal. The St James Parish project is one of several North American petrochemical projects to have been slowed down by the COVID-19 pandemic.

This summer, Chevron Phillips decided to postpone its FID on a 2 million mt/yr ethane cracker complex being developed along the US Gulf Coast in partnership with Qatar Petroleum, according to a Chemical Week report.

In March, Pembina announced that it was freezing capital spending on its PDH/PP plant in Western Canada.

And companies with construction already underway, including Shell and NOVA, have reported delays due to COVID-19.

--Reporting by David Barry, david@petrochemwire.com;

--Editing by Joe Link, Joe@petrochemwire.com 

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After 5-month Rally, North American PE Market is at Inflection Point

October 16, 2020

Buoyed by resilient domestic demand and supply cutbacks, the North American polyethylene market has seen prices rise steadily since May, but there are growing signs that the rally is losing momentum.

The run-up includes four consecutive months when suppliers were able to implement contract market increases of 4-5 cts/lb, bringing the net contract price increase over the period to 19 cts/lb.

Spot prices have followed a similar trend. The benchmark high density polyethylene (HDPE) blow molding grade in the Houston railcar market closed on Thursday at 44.125 cts/lb, compared with prices at 24 cts/lb in late April and early May of this year, according to OPIS PetroChem Wire data.

With ethane prices remaining low, the sustained PE rally has pushed the spread between Houston bulk HDPE and Mont Belvieu ethane into the mid-30s cts/lb over the past month, a level that has not been seen since 4Q 2018.

The high prices and tight supplies of the past few months have come at the expense of export volumes. US PE export shipments in August fell to 904,000 mt, down from the high of 967,070 mt in June, according to the Commerce Department. Data for September is not yet available but will likely show another contraction of export volume.

Export traders describe a market at a standstill this month, with scarce offers from North American producers and pricing that no longer works to the large-volume markets in Asia and is increasingly under pressure in Latin America and Africa.

Sales to Latin America have begun to slow, partly because high US export prices have made imports from Europe, the Mideast and Asia more competitive. But there are also indications that traders have begun to jettison inventory in anticipation of a downturn in the market.

LLDPE film, currently one of the most balanced PE grades in North America, has been offered at 40-42 cts/lb railcar FOB Houston throughout the first half of October. However, Latin American markets are seeing offers that net back to a Houston price of 38-39 cts/lb. It’s unclear whether those prices are related to traders clearing out older, lower-cost inventories or if the prices are based on short-selling strategies.

In the domestic market, some customers are indicating that they will put off discretionary purchases until November, anticipating that prices could be lower, or at least will not be any higher.

Some of the most volatile PE domestic markets have already seen some price erosion. In the secondary market, LDPE C&A prices have retreated from 44 cts/lb in mid-September to around 42 cts/lb today. Resale prices for wide spec HDPE frac melt, used in non-pressure pipe applications, have slid back to 48-49 cts/lb this month after trading at 51-52 cts/lb in September.

In the generic prime resale market, there were isolated reports of more aggressive offers this week. Some of the lower offers were attributed to short-selling strategies. Traders and end users said it was unlikely that producers will be able to implement a fifth consecutive prime market price increase this month.

It remains to be seen when and how quickly prices will drop, but export traders were optimistic that November would bring improvements in both availability and pricing.

One trader speculated that producers would start the month out flat, and then begin stepping prices down 1-2 cents each week.

November in recent years has been a month for heavy export sales as suppliers work to pare down inventories before the year end. However, this year inventories are already low, in part because of Hurricanes Laura and Delta, but also because of persistently low operating rates. Industry data shows that US and Canada producers’ PE inventories dropped in four of the past six months.

Given the current strength of PE margins, North American operating rates and inventories are expected to recover. However, if producers need to export larger volumes by year end, traders say the prices will need to be lower than they are today in order to reach larger markets outside the Americas.

As one indicator of the price gap that may need to be filled, current LLDPE butene film pricing in China of around $920/mt (41.7 cts/lb) CFR is roughly $100-150/mt (4.5-7 cts/lb) lower than market levels reported in South America.

--Reporting by David Barry, david@petrochemwire.com
--Editing by Joe Link, joe@petrochemwire.com

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U.S. Ethane Spreads in Europe Reach Tightest Since April in Hurricane's Wake

September 8, 2020

European price spreads for ethane cargoes loading from the U.S. have contracted to the narrowest in more than four months in the aftermath of Hurricane Laura.

Delivered CIF northwest Europe prices for ethane loading from Morgan's Point in the U.S. Gulf are currently pegged $34.27/metric ton above ethane loading from Marcus Hook, to the northeast of the country.

That's the tightest spread since April 30, according to OPIS data Monday. The spread between ethane loading Marcus Hook and Morgan's Point blew out to its widest at $109.13/mt on May 15, according to OPIS data.

A sell-off in Mont Belvieu Purity Ethane prices over the last week of August and first week September narrowed the spread as U.S. Gulf petrochemical units closed ahead of Hurricane Laura barreling through the region, limiting ethane buying interest. This impacted petrochemical units primarily in the Beaumont/Port Arthur, Texas and Lake Charles areas, with other regions in the U.S. relatively unscathed. Offline petrochemical capacity in the Lake Charles hub as a result of storm damage was estimated at around 11% of U.S. ethylene capacity, according to IHS Markit.

Shuttered demand diverted more ethane cargoes out for export, with shipments from Morgan's Point rising to 245,000 mt in August up from 183,000 mt in July, according to IHS Markit Waterborne data. By contrast, Marcus Hook ethane export volumes declined over the same period by 18.9% to 90,000 mt in August.

The amount of ethane left in natural gas and so not extracted from it, known as ethane rejection, further hints at the lack of U.S. Gulf ethane demand, data from PointLogic showed.

Ethane rejection for the U.S. Gulf Coast increased to 168,000 b/d for the week ending September 4, a 77.4% gain over the previous week, according to OPIS Point Logic. Natural gas producers left an additional 130,000 b/d of ethane in their gas streams rather than extract it, but despite this reduction of supply, the lack of demand failed to arrest the slide in Purity Ethane prices.

Gain greater perspective on global spot prices for naphtha, propane and butane with the OPIS Europe LPG & Naphtha Report. Dive deeper into the global supply chain by connecting OPIS’ benchmark Mont Belvieu assessment with spot prices worldwide to enrich your understanding of the LPG landscape. Get your free trial here.

--Reporting by Yazdi Merchant, yazdi.merchant@ihsmarkit.com

--Editing by Rob Sheridan, rob.sheridan@ihsmarkit.com

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Louisiana Ethylene Prices Surpass Texas; Ethane Sees Fixed-Price Trade

September 3, 2020

Spot ethylene prices in Louisiana gained a premium to those in Texas, something not seen since late 2019, as olefins plants in the Lake Charles area struggled to resume normal operations after Hurricane Laura swept through the region last week. At the same time, spot ethane in Louisiana has seen a modest uptick in activity.

Spot ethylene for September delivery at the Choctaw hub in Louisiana traded up to 28 cts/lb Thursday morning, while September ethylene at NOVA's hub in Mont Belvieu, TX traded multiple times at 26.5 cts/lb. Just one month ago, the MtB-NOVA hub held a premium of 3 cents over the Choctaw hub. The move is not extreme but it is notable. The most extreme differential between the two locations was in the 2013-2014 aftermath of an explosion at the Geismar, LA olefins site (owned by Williams at the time), when Louisiana ethylene was up to 25 cents above ethylene in Texas. For much of 2020, the premium at the NOVA hub has been 1-2 cents.

The impact of hurricane-related plant outages is compounded by some lingering pre-storm outages at Port Arthur and Chocolate Bayou in Texas, and spot market activity has gone a bit wild as a result. According to OPIS PetroChem Wire, more than 150 million pounds of ethylene for delivery in September alone has traded since Sep 1. This compares with 15 million on the third trading day of August and 250 million pounds for all of August.

Petrochemical sites still shut at Lake Charles include Westlake, Indorama, Lotte and Sasol. If companies are able to restart their downstream chemical units, such as polyethylene and PVC, before the main steam crackers can fully resume normal output, the area would be short for ethylene.

It is possible that chemical companies are selling their feedstock inventory while their plants are shut. The typically sleepy Louisiana ethane market has seen incrementally more action than usual Thursday in the form of a 12.5cts/gal fixed-price trade confirmed on exchange. On the day, the price change has been marginal, down just 0.125ct from the day before.

Though fixed-price deals are not unheard of, Louisiana ethane historically has tended to trade at a differential to its Mont Belvieu purity ethane counterpart, and Wednesday’s implied midpoint of 12.625cts/gal was based on a standing discount of 6.5cts. Mont Belvieu ethane was down 2-3 cents Thursday afternoon at 18.75 cts/gal.

--Reporting by Julia Giordano, julia@petrochemwire.com; David Barry, david@petrochemwire.com; and Jessica Marron, jmarron@opisnet.com

--Editing by Kathy Hall, kathy@petrochemwire.com

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Petrochemical Plants in Laura's Path Begin Restarting

August 28, 2020

In the wake of Laura passing through the Port Arthur, TX and Lake Charles, LA areas, many of the petrochemical plants that shut or reduced operating rates earlier this week were restarting on Friday.

Dow has begun restarting its operations at Deer Park, La Porte, Bayport and Texas City, TX. Full operations are expected to be achieved by Tuesday.

Ineos was restarting its Olefins 1 unit at Chocolate Bayou, TX. Its Olefins 2 unit had been shut since May for a planned turnaround.

ExxonMobil’s initial assessment of Beaumont, TX facilities show need for minor repairs; restart activity has begun. The company’s Baton Rouge, LA and Baytown, TX sites were operating normally.

Motiva began restarting its olefins unit at Port Arthur, TX on Thursday morning.

Sasol's Lake Charles, LA manufacturing plants are shut down without power; the site had no flooding as a result of the storm surge.

Not all plants were able to restart yet. Westlake reported that its Louisiana assets sustained limited damage and that their restart will depend upon availability of utilities and feedstock. The company has significant assets producing ethylene, polyethylene and vinyls. Chevron Phillips’ Port Arthur, TX and Orange, TX sites remained without power but showed limited visible damage as of Thursday evening.

On the transportation side, the Port of Houston was reopening its Bayport and Barbours Cut container terminals for normal operating hours on Friday. Union Pacific had reported on Thursday that tracks in the Lake Charles area sustained damage and were not in service. Its Houston-area tracks were not damaged.

Petrochemical and plastic spot markets have been quiet since Wednesday and prices were little changed after some gains earlier in the week. August ethylene at the Mont Belvieu NOVA hub was 23.5 cts/lb (69.1 cts/gal equivalent), August propylene was 37.5 cts/lb (163.1 ctsgal), while downstream high density blow mold grade polyethylene was 37 cts/lb and homopolymer raffia grade polypropylene was 45 cts/lb.

For the latest on plant status, go to our web page at https://www.petrochemwire.com/storm-coverage/

--Reporting by David Barry, david@petrochemwire.com;

--Editing by Kathy Hall, kathy@petrochemwire.com

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Spot Ethylene, Propylene Prices Rise as Laura's Landfall Looms

August 26, 2020

Spot ethylene and propylene prices were rising on Tuesday and Wednesday as Hurricane Laura moved closer to landfall in a region heavily populated with refineries and petrochemical plants. While spot market trading activity for August ethylene delivery was waning, deals for September delivery were pulling values for both months higher. The August spot market for propylene has been active yesterday and today.

Sep ethylene at the NOVA hub in Mont Belvieu, Texas has traded up from 20 cts/lb (an equivalent of 59.4 cts/gal) on Friday to 23.5 cts/lb (69.8 cts/gal), an increase of 12%. Spot ethylene at the hub in Choctaw, Louisiana has traded from 18 cts/lb (53.5 cts/gal) on Friday up to 21 cts/lb (62.4 cts/gal) and then retreated to end at 20.75 cts/lb (61.6 cts/gal) on Wednesday, a 15.2% gain.

As of Wednesday afternoon, at least 30% of ethylene capacity in Texas and Louisiana was either shut, reduced or in the process of shutting; about 10% of that was shut prior to the weather situation for planned maintenance or an unplanned operating issue. The closure of the Houston Ship Channel is assumed to have delayed the departure of one ethylene cargo scheduled to load during the Aug 26-28 timeframe, bound for Asia.

Spot propylene for August delivery has traded up from 35.5 cts/lb (154 cts/gal) last Friday to 37.75 cts/lb (164.2 cts/gal), a 6.5% gain. Sep propylene was bid up to 36.25 cts/lb (157.7 cts/gal equivalent) but offers would not budge from 39 cts/lb (169.6 cts/gal) as of Wednesday afternoon. Propylene supply has been snug for the past two months as various plants have experienced unplanned outages.

While many petrochemical sites that have shut olefins units have also shut associated downstream units, such as polyethylene and polypropylene trains, the true supply panic from past storms emerged after the storm left the region and the downstream plants were able to restart more quickly than the more complex olefins plants. At present, intermodal railyards and railroad lines have been shut, but if damage is minimal, the downstream markets could return to normal faster than their feedstocks.

Spot polyethylene and polypropylene prices have not moved so far this week, with high-density blow mold grade PE at 37 cts/lb FOB Houston and homopolymer raffia grade PP at 45 cts/lb FOB Houston.

--Reporting by Julia Giordano, julia@petrochemwire.com, David Barry, david@petrochemwire.com;

--Editing by Kathy Hall, kathy@petrochemwire.com

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Fire hits Texas polyethylene film manufacturing site

August 19, 2020

The Grand Prairie, TX fire department said via social media that its crews were working Wednesday morning to contain a fire at the Poly-America plant site on the 2000 block of West Marshall Drive.

Poly-America is a large supplier of polyethylene (PE) films for garbage bags as well as thicker films for construction and agriculture; it claims to be the world’s largest producer of PE construction film.

Fire officials said the blaze began around midnight Wednesday morning when a high-tension power line fell into the plastic inventory. There were no reports of injuries.

Live aerial footage from an NBC5/DFW helicopter around 10:30 am local time showed fire crews putting water and foam on an open area north of the plant used to store plastic scrap bales. The fire appeared to have burned several hopper cars and damaged the tracks immediately south of the storage area, but there was no visible damage to nearby plant structures.

Polyethylene market participants said the plant is a large consumer of PE scrap, both post-industrial and post-consumer, as well as virgin PE resin.

The company is known to collect post-industrial PE scrap from Gulf Coast petrochemical producers. It processes the scrap and blends it with virgin resin to produce low-cost films.
Poly-America also operates subsidiaries in Chester, SC, Henderson, NV, Cottage Grove, MN and Mont Belvieu, TX.


--Reporting by David Barry, David@petrochemwire.com;

--Editing by Joe Link, Joe@petrochemwire.com

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Severe weather event disrupts Midwest rail traffic

August 11, 2020

Union Pacific notified customers on Tuesday that its Midwest rail network was impacted in a number of locations by yesterday’s line of powerful storms, with winds up to 100 miles per hour.

“The high winds caused significant debris across our main line and regional rail yards. Once the winds subsided last night, our Engineering and Operating teams began to clear debris where it was safe to access,” the company said.

As of Tuesday morning, the Marshalltown to Cedar Rapids, IA rail route remained out of service. Customers with shipments through the area were told to expect a minimum of 24-48 hours of additional transit time.

The powerful, long-lived line of severe storms known as a ‘derecho’ tracked across eastern Iowa and northern Illinois on Monday afternoon, producing straight-line winds of 60-80 mph and some reports over 90 mph, according to the National Weather Service. Several semi trucks were blown off of major highways and numerous power outages were reported across Iowa.

A LyondellBasell spokesperson was not immediately available to comment on the status of the company’s Clinton, IA and Morris, IL manufacturing sites, which were in the path of the storm.

The Clinton, IA airport, about 2 miles northwest of LyondellBasell’s olefins/PE complex, received wind gusts as high as 75 mph at around 2pm local time.

About 100 miles east, in the area of LyondellBasell’s Morris, IL olefins/PE plant, there were reports of 59 mph wind gusts at the Morris airport and golf ball sized hail.

--Reporting by David Barry, David@petrochemwire.com;

--Editing by Joe Link, Joe@petrochemwire.com

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Sasol delays Lake Charles LDPE startup to October

July 23, 2020

Sasol now expects to achieve beneficial operations at its 420,000 mt/yr low density polyethylene (LDPE) plant in Lake Charles, LA before the end of October 2020.

The unit was damaged during a fire in January.

“Some challenges were experienced in the completion of the restoration process, resulting in a slight delay to the previous market guidance of a [beneficial operations] date before September 2020,” the company said in a statement.

The company defines beneficial operations as 72 consecutive hours of on-spec production.

The North American LDPE market has been tight in recent months, but two new producers, Sasol and Formosa, are working to bring on new capacity later this year. Formosa’s 400,000 mt/yr LDPE unit Point Comfort, TX is expected to start up in September or October.

Tight LDPE supply and strong demand from packaging applications has resulted in an unusually strong premium in the export market. So far in July, LDPE film has averaged a 9 cts/lb ($198/mt) premium to LLDPE butene film on a railcar FOB Houston basis, according to OPIS PetroChem Wire data. A year ago, that spread was only 2-3 cts/lb ($44-66/mt).

LDPE film for export has been at 40-41 cts/lb railcar FOB Houston this week, up from recent lows of 35 cts/lb in early May.

In the domestic secondary market, resale pricing for generic prime LDPE clarity film (5-6% haze) was at 54-56 cts/lb railcar delivered.

--Reporting by David Barry, david@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

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US Ethylene, PE Prices See Strong Start to July, Buoyed by Exports

July 7, 2020

Despite facing a general headwind of unsteady demand from many manufacturing market sectors, US ethylene prices are up nearly 20% at the start of July. 

Ethylene at the NOVA hub at Mont Belvieu staged a mild rebound in the second half of the month, rising from a low of 11.75 cts/lb (a 34.9 cts/gal equivalent) to 13.625 cts/lb (40.5 cts/gal) by June 30. In the first few trading days of July, however, the rebound has looked like more of a rally, with the front month hitting 16 cts/lb (47.7 cts/gal) on July 2, a gain of 17.5%. MtB-NOVA ethylene continued to hold steady at that level, trading another six times at 16 cts/lb so far this month. At the Enterprise hub at Mont Belvieu, pricing increased from 14.5 cts/lb (43.1 cts/gal) for June-delivery ethylene on June 30 to 15.5 cts/lb (46 cts/gal) for July pounds on the first of the month and then to 16.5 cts/lb (49 cts/gal) this morning. Prompt ethylene trading activity was brisk with a total of 43 million pounds trading in Texas during the first four trading days of July.

US Gulf Coast maximum operating cracker rates are estimated to be near 88% so far this month compared to 91% in June. The July rates include known downtime at the BASF Total Petrochemicals (BTP) cracker in Port Arthur, TX, Eastman’s HCC-3 olefins unit in Longview, TX, Formosa’s OL-1 olefins unit at its facility in Point Comfort, TX, the Olefins Unit 1 at the Ineos Chocolate Bayou, TX facility, and the Dow TX-9 olefins unit in Freeport, TX. Other companies have confirmed in quarterly earning calls that they have reduced rates at all of their chemical plants. 

While demand forecasts have been cautious during the COVID-19 pandemic, US polyethylene producers saw relatively strong sales in the domestic market in June, although some of this was attributed to customers building inventory in advance of anticipated price hikes. Current pricing for high-density blow mold grade polyethylene was 33 cts/lb FOB Houston. Prices for wide-spec polyethylene, which is considered a leading indicator for the broader market, have risen by 3-7 cents/lb from lows seen in late April and early May. 

Exports have played a key part of the overall price strength for both ethylene and polyethylene. 

Enterprise's ethylene export terminal that opened at the end of 2019 has steadily shipped more cargoes each month. In 1Q 2020, cargoes from Houston were going to both Europe and Asia, but the arb to Europe has closed and all cargoes in 2Q went to Asia. Roughly 25,000 mt left Houston in April and another 25,000 mt left in May. In June, volumes jumped to 100,000 mt spread over nine cargoes. So far in July, shipbroker reports indicate that eight cargoes have been scheduled to leave the Houston Ship Channel during July totaling approximately 75,000 mt. 

Polyethylene export volumes have continued to rise year-over-year. PE export shipments in May totaled 954,058 mt, up 21% from a year earlier. April and March polyethylene shipments were up 11% and 24% year-over-year, respectively. Demand from China was an important driver of US PE exports in the second quarter. China emerged as the top export destination in May, accounting for 167,435 mt of US PE exports, and traders estimated this volume could exceed 300,000 mt in June when statistics are released.

 

--Reporting by Julia Giordano, julia@petrochemwire.com and David Barry, david@petrochemwire.com;

--editing by Kathy Hall, kathy@petrochemwire.com and Joe Link, joe@petrochemwire.com

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BP exits petrochemical manufacturing, sells assets to Ineos

June 29, 2020

BP, once a global powerhouse in petrochemical manufacturing, is completely exiting the space and selling its remaining chemical plants to Ineos. The $5 billion deal includes BP's global aromatics, acetyls plants and related businesses. Ineos Olefins & Polyolefins was created in 2005 when it acquired BP assets that were operating under the subsidiary name Innovene. Ineos currently operates petrochemical assets at 180 sites in 26 countries, according to BP's statement today. 

The transaction, which is expected to close before the end of this year, involves Ineos paying BP a deposit of $400 million and payment of a further $3.6 billion on completion. An additional $1 billion will be deferred and paid in three installments during the first half of 2021. The deal is closing about one year ahead of BP's target to divest $15 billion of assets and "reinvent BP" according to the statement. 

"I recognise this decision will come as a surprise and we will do our best to minimise uncertainty," BP CEO Bernard Looney noted in the company's press statement. 

The sale includes all of BP's aromatics and acetyls businesses, including a PTA plant at Cooper River, SC, xylenes and acetic acid manufacturing at Texas City, TX and its 36.9% stake in assets operated by Atlas Methanol at Point Lisas in Trinidad & Tobago. "In total, the businesses have interests in 14 manufacturing plants in Asia, Europe and the US," according to the BP statement. "Strategically, the overlap with the rest of BP is limited and it would take considerable capital for us to grow these businesses."

 

--Reporting by Kathy Hall, kathy@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

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Braskem prepares to start up US polypropylene plant, ramp up exports

June 24, 2020

Braskem announced that it has completed construction of its Delta polypropylene (PP) plant in La Porte, TX, and has begun the commissioning process.

“Initial production test runs are anticipated to begin in the next month with the first full scale commercial production activity currently expected in the third quarter of 2020,” the company said in a statement on its website.

The Unipol-process PP plant, with a capacity of more than 450,000 mt/yr or 1 billion pounds/yr, will have the capability to produce a range of HoPP and CoPP resins. It will be the largest single unit in the world, and the first new PP plant built in the US since 2003, according to Braskem.

The company also said its Port of Charleston, SC, export center is scheduled to open in 3Q 2020, providing packaging and storage services to export 204,000 mt/yr PP from its US plants.

The combination of improved demand, planned outages in the third quarter and export opportunities will support a smooth ramp-up of the new facility, according to the company’s vice president of North American PP, Alexandre Elias.

Another US PP manufacturer,  Formosa Plastics Corporation USA, has notified customers in recent weeks that it is planning a significant PP plant turnaround at Point Comfort, TX, during August and September.

US PP export prices have made substantial gains over the past two months. Benchmark HoPP grades for raffia and injection molding applications were priced in the high 20s cpp and low 30s cpp railcar FOB Houston as recently as 1H May.

June HoPP raffia export pricing is at 35 cpp railcar FOB Houston, up 4-6 cpp from the reported lows, according to OPIS PetroChem Wire.

Domestic PP spot prices have been steady since May, reflecting the flat trend for monomer prices. Spot generic prime HoPP resale pricing has been range-bound at 39-42 cpp on a rail delivered basis since the beginning of May.

However, domestic brokers have indicated they are slightly bullish, with domestic demand showing a gradual recovery from the coronavirus disease 2019 (COVID-19) lockdowns of March-May and global propylene/PP values supported by the recent uptick in crude oil prices.

--Reporting by David Barry, David@petrochemwire.com;

--Editing by Joe Link, Joe@petrochemwire.com

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Rising polyethylene secondary market points to momentum shift

May 26, 2020

US domestic spot resale prices for polyethylene (PE) have moved up by 1-2 cts/lb in 2H May amid reports of stronger-than-expected demand and tighter spot availability.

The secondary market for wide spec and generic prime PE is commonly viewed as a leading indicator for the broader prime market.

pcw 0527Last week, brokers were taking orders for offgrade high density polyethylene (HDPE) frac melt at 29-30 cts/lb railcar delivered, up from 27-28 cts/lb earlier in the month, according to OPIS PetroChem Wire.

Good quality offgrade LLDPE butene film was reselling at around 30 cts/lb railcar delivered, compared with 28-29 cts/lb earlier in the month.

Generic prime spot resale prices for LLDPE butene film were steady at 33-35 cts/lb railcar delivered, but availability of resin at May prices was drying up. Resellers expected offers to move higher, based on producers’ announcements to raise prime market pricing by 4 cts/lb in June.

Generic prime HDPE BM HIC spot availability was reported to be sold out for May. Resale pricing for HDPE BM HIC was last seen at 34-36 cts/lb railcar delivered.

The spread between the prices for offgrade/wide spec resin and generic prime resin is narrower than usual, hinting at upward pressure on generic prime prices.

Resellers reported more inquiries from customers in the past week. Some of the uptick in activity was related to downstream manufacturing plants reopening or running at higher rates, although the manufacturing reopening was described as gradual and not wholesale.

Resellers also attributed the rise in PE buying interest to a shift in sentiment that prices are unlikely to move lower from here, prompting end users to replenish their resin inventories.

The increase in domestic buying interest has been accompanied by a reduction in PE spot offers from suppliers. Traders saw indications that some suppliers have been quietly dialing back operating rates, in addition to the much-publicized operating rate cuts announced last month by Dow Chemical and LyondellBasell.

One resin broker predicted that many orders will get pushed into June delivery slots, because there is not enough availability to fill all the orders for May.

The operating cuts were said to be motivated by rising upstream ethane costs, which made PE producers margins unsustainable, as well as a desire to avoid building inventory amid the uncertain demand environment of the coronavirus disease 2019 (COVID-19) pandemic.

 

--Reporting by David Barry, David@petrochemwire.com;

--Editing by Joe Link, Joe@petrochemwire.com

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China market offers near-term support for US PE export pricing

May 6, 2020

US PE spot prices for export have firmed in early May amid reports of stronger demand from China in recent weeks.

Large volume (>10 railcar) LLDPE and HDPE transactions were reported in late April as low as 22.5-23 cts/lb, according to OPIS PetroChem Wire, but producers were not seen as eager to repeat those deals in early May. HDPE blow molding grade closing Monday at 24 cts/lb for railcars staged at Houston-area warehouses. Some suppliers have backed out of the market temporarily after booking large volumes for export in April.

Other suppliers still had incremental resin available for export but were holding firm on export offers at 24 cts/lb for LLDPE butene film and 25 cts/lb for HDPE blow mold.
Traders cited several reasons for the shift in tone at the start of May. Producers were still sizing up their domestic sales before committing to May cargoes, with optimism that loosening containment measures against coronavirus disease 2019 (COVID-19) would result in stronger consumer spending and PE consumption.

On the supply front, several PE producers have stated publicly that they are reducing 2Q operating rates and even idling select plants because of slower demand and less favorable production economics in North America relative to other regions.

And overseas, the gradual reopening of China’s economy has been accompanied by a surge in demand for PE imports, including US-origin PE, for which the Chinese government began allowing exemptions from trade war tariff barriers in early March.
There were estimates that more than 100,000 mt of US PE was booked for export to China over a one-week period in April. By comparison, PE shipments to China during all of March amounted to just 29,000 mt.

PE prices in China have been boosted in recent weeks by the resumption of manufacturing activity as well as speculative activity in the futures market, which tends to react more quickly than the physical PE market to changes in crude oil pricing and general sentiment.
Trading activity paused in China late last week and early this week for a national holiday, but futures markets reopened Wednesday with a 4.3% gain on the active LLDPE contract.
Higher futures prices incentivize PE import buying as players work to cover speculative positions.

US cargoes were sold last week at $680/mt (30.8 cts/lb) CFR CMP for LLDPE film and HDPE injection grades, $690-700/mt (31.3-31.8 cts/lb) CFR CMP for HDPE blow molding, and $700-710/mt (31.8-32.2 cts/lb) CFR CMP for HDPE film.

The China trade has established a price floor for other regions and relieved inventory pressure for US producers, but traders were uncertain how long it will last.

With the abundance of US PE now on the water or getting ready to ship in May or early June, China will receive an influx of US PE around mid-year. If demand for finished goods does not recover as quickly as expected, Chinese converters could be stuck with high resin inventories later this summer.

Shipping companies are also planning to hike freight rates in June, which would squeeze margins and pressure pricing on exports to China.

Some traders were also concerned about a nightmare scenario in which China reestablishes steep retaliatory tariffs on US PE and other chemicals, forcing a scramble to re-direct cargoes en route.

For now, at least, China has proven to be a resilient customer for US PE at a time when all other regions are struggling with the economic impacts of COVID-19.

 

--Reporting by David Barry, David@petrochemwire.com;

--Editing by Joe Link, Joe@petrochemwire.com

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Dow to idle 10% of PE/elastomers capacity for a month

April 30, 2020

Dow announced today that it will idle three polyethylene (PE) and two elastomers units for at least one month to match demand trends in the US, Europe and Latin America.

The units, located in Argentina and the US Gulf Coast, amount to 2 billion lbs/yr of capacity and represent about 10% of Dow’s global PE and elastomers capacity, company officials said during Dow’s 1Q earnings call.

Dow officials said they did not expect to lose any plastics market share because of the move, saying the decision would prevent a buildup of resin inventory amid weaker demand from industrial shipping and automotive segments.

“We’re not closing high cost assets, we’re closing to balance demand,” said Dow CEO Jim Fitterling.
Meanwhile, the company said it has not idled any of its upstream crackers, noting that about 9-10% of the US Gulf Coast industry’s capacity is offline currently.

Dow’s TX-9 cracker is back up from a recent planned outage and running at an expanded rate of 2 million mt/yr. Most of the additional 500,000 mt/yr capacity was intended for MEGlobal.

Fitterling said that Dow’s US Gulf crackers consumed approximately 75% ethane and the remainder propane and butane in 2019. While naphtha prices have come down, he said ethane was still the best crack because the co-products of naphtha cracking, especially butadiene, have seen significant demand destruction due to the halt in automotive manufacturing.

“There’s no place for the C4s to go,” Fitterling said.

 

--Reporting by David Barry, David@petrochemwire;

--Editing by Joe Link, Joe@petrochemwire.com

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US Olefins Markets Shrug Off WTI Plunge; Aromatics Take a Hit

April 21, 2020

The freefall seen in prompt WTI futures on Monday was ignored by US olefins markets, but benzene and toluene were not immune as those prices sank.

Spot market April ethylene, which is barely profitable based on any NGL, traded slightly higher late Monday, moving from 8.5 cts/lb (25.2 cts/gal equivalent) to 8.875 cts/lb (26.4 cts/gal equivalent) basis FOB Mont Belvieu-NOVA. Ethane, the cheapest feedstock currently, was up 10-11% on the day, with April trading in a range of  11.75-15 cts/gal FOB Mont Belvieu. April ethane was extending gains Tuesday morning, reaching 17 cts/gal early in the day. In general, ethylene tracks more to natural gas than to crude oil; May nat gas futures were up 17 cents on Monday, settling at $1.924/mmBtu.

Spot polymer grade propylene (PGP) traded up from 24.25 cts/lb (105.5 cts/gal equivalent) to 25 cts/lb (108.75 cts/gal) basis FOB Mont Belvieu-Enterprise. While this finished grade of propylene can track propane, which was down 2-3% yesterday, its other major feedstock is refinery grade propylene (RGP), which has become less and less available amid widespread refinery slowdowns across the US. RGP is being bid into a void, with no transactions seen at all so far in April, but bids have risen from 9.5 cts/lb (41.3 cts/gal) at the start of the month to 15.5 cts/lb (67.4 cts/gal) on Monday, a gain of 66%.

Ethylene and propylene have seen better demand than most refined product markets, owing to the surging worldwide need for masks, face shields, gloves, medical supplies and flexible packaging for consumer goods and food. 

Benzene and toluene are another story, however. Benzene's major downstream market, styrene (and polystyrene) is not in high demand and toluene's use in gasoline has also created a stagnant buyers' pool. Benzene tracks crude closer than most chemicals, while toluene tends to follow gasoline price trends. April benzene dropped from 109 cts/gal down to 95.75 cts/gal basis DDP Houston/Texas City. April toluene fell from 100 cts/gal to 94.25 cts/gal. 

Olefins and aromatics forward markets, like crude and RBOB, were firmly in contango. June and July pricing was 9 cts/lb and 9.875 cts/lb for ethylene, 25.75 cts/lb and 26.125 cts/lb for PGP, 102 cts/gal and 104 cts/gal for benzene and 100.75 cts/gal and 106 cts/gal for toluene.

While June WTI futures remain in positive territory, benzene market participants are concerned that crude will eventually weigh down June and July pricing as well, which helped to freeze market players on Monday as they wait to see where crude heads next. As crude has fallen again on Tuesday morning, benzene appears poised to see another 5-10 cts/gal declines today. As for toluene, potential buyers in Asia are kicking the tires on availability out of the US Gulf Coast. However, the arbitrage level to send to Asia is under 85 cts/gal. The reformate market is currently below 85 cts/gal and toluene could head towards that level this week, but that also assumes that Asia pricing will hold overnight despite the weak energy markets. Toluene's disproportionation (TDP) netback value to produce xylenes is near 90 cts/gal, but with paraxylene values also weak there is little incentive to run the units harder at the moment.

 

--Reporting by Julia Giordano, julia@petrochemwire.com; David Barry, david@petrochemwire.com; and Kevin Wallman, kevin.wallman@ihsmarkit.com;

--Editing by Kathy Hall, kathy@petrochemwire.com and Joe Link, joe@petrochemwire.com

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North American Polyolefins Demand Surges in Troubled March

April 13, 2020

U.S. and Canadian producers' polyethylene (PE) sales were at a record high of 4.687 billion lbs. (2.126 million mt) in March, according to preliminary data released by the American Chemistry Council (ACC).

The figures verify anecdotal evidence of strong plastics demand in March, as consumers rushed to stock up on food and supplies -- much of it packaged in plastic film or containers -- in preparation for sheltering at home from the coronavirus disease 2019 (COVID-19).

One film manufacturer described their March demand as "outstanding," and some plastic processors reported a continuation of that strength in April.

However, some PE producers were sounding notes of caution about second-quarter demand and were said to be trimming rates to balance output against lower demand forecasts.

Resin brokers last week noted that bulk trucking companies in the U.S. were calling for more business to keep their drivers employed amid a downturn in shipments. Bulk trucks are used to deliver plastic resins from rail terminals to plastic processing plants, and the slowdown in bulk trucking suggests a slowdown in business for smaller plastic processors, which rely more on bulk and box trucking for their resin supplies. Large-scale plastic processors, particularly the operations that produce huge quantities of plastic packaging film or bottles for consumer products manufacturers, tend to have bulk railcars of resin shipped directly to rail sidings adjacent to their plants.

The sentiment around PE exports has also been trending negative, with typical outlets such as Africa, Latin America and India hobbled by coronavirus containment measures. Traders have become increasingly concerned about the creditworthiness of their customers, and issues with payments and order cancellations are expected to increase in emerging markets, especially those like Brazil that have experienced currency devaluations of 20% or more since the start of 2020.

North American PE export sales totaled 1.854 billion lbs. (841,000 mt) in March, about 10% above the 12-month average. North American PE producers have become more dependent on export sales in recent years, with exports accounting for between 35% and 43% of total sales over the past 12 months.

China may have played a large role in strong export figures for March. Demand there has been boosted by rebounding manufacturing activity and a government initiative to waive trade war tariffs on U.S.-origin PE, which took effect early in the month.

However, the abundance of PE resin in the global market and the low cost of feedstocks has put PE export prices under pressure.

The Houston railcar market for high-density polyethylene blow molding grade was at 26-27cts/lb. FOB as of April 9, according to OPIS PetroChem Wire. That market averaged nearly 30cts/lb. in March and 32cts/lb. in February. Even at the latest prices, traders are hesitant to buy unless they have a firm purchase order for the new resin. Buyers in Asia and the Middle East are bidding at levels that would require a Houston railcar price of 23-24cts/lb., traders said last week.

The polypropylene (PP) industry followed PE's lead and posted strong sales for March, according to the preliminary ACC data.

North American PP sales totaled 1.430 billion lbs. (649,000 mt) in March, which was a seven-month high. PP industry operating rates were also at a seven-month high in March, resulting in the first substantial inventory build since last summer. The industry was plagued by low operating rates in the high 70s% and low 80s% from October 2019 to February 2020, partly due to weaker demand and partly due to plant maintenance and unplanned outages.

However, as with PE, the PP demand outlook may not be as rosy as March sales figures would suggest.

PP nonwoven fabrics are an important component in the COVID-19 response, used in protective gear and disinfecting wipes. Production of those materials is going to be at full throttle for the foreseeable future.

However, a large portion of PP goes into rigid durable goods such as car parts and plastic totes, and the molders of these goods are the companies slowing down the most in recent weeks.

Custom PP molders, which use other company's molds to produce batches of parts, are barely running compared with early March, noted one resin supplier.The Houston railcar market for PP homopolymer raffia or injection molding grades was at 35.5cts/lb. as of April 9, according to OPIS PetroChem Wire. That market averaged 41.3cts/lb. in March and 41.7cts/lb. in February.

 

--Reporting by David Barry, david@petrochemwire.com;

--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com

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US Aromatics Market Takes Another Hit; Olefins and Polymers Unfazed

March 24, 2020


“Can’t get much worse” was the talk of last week in the US aromatics markets -- and then things got much worse on Monday.

Refiners throughout the US were running into containment issues as their gasoline demand has disappeared in a matter of weeks. That pushed RBOB prices down to $0.41/gal. However, the containment concerns pushed down the front month contracts, and May is now showing a $0.07/gal contango.

Like gasoline, finding buyers is a challenge in the toluene market. There appears to be plenty of supply looking for a home and the normal backstop into gasoline is withering away. Gasoline blenders are bidding for toluene on a gasoline plus $0.30/gal basis. That is below reformate prices which are $0.35–0.40/gal over RBOB. In theory, the toluene disproportionation (TDP) netback is $0.90/gal but with demand falling so fast, blenders are hesitant to buy toluene at any level.

The spot benzene market fell $0.25/gal on Monday -- a 19% one-day drop -- despite crude prices largely holding steady. General malaise for energy and the expectation for crude to eventually fall as well didn’t do benzene sellers any favors. However, the main culprit for US benzene's price slide was Europe. EU, like North America, is in the process of closing down activity in their cities and demand is expected to fall quickly for everything not tied to packaging or medical supplies.

That left European traders in a state of panic as well, and an April cargo traded down to $300/mt ($1/gal). Offers then fell to nearly $270/mt (90.3 cts/gal) at the end of the European day. That dragged the US Gulf Coast price down to near the arbitrage level from Europe. With demand uncertain in this region and Marathon delaying its turnaround for at least a month, there appears to be little appetite to bring more EU material to the US.

The US Gulf market was thin for most of the day as buyers started under $1/gal. It took nearly the whole day for ranges to narrow and just before the close of business a few April deliveries traded at $1.05/gal. Benzene's slide has been dramatic -- it was $1.80/gal on Monday, March 16, and was $2.1075/gal on Monday, March 9. The last time that prices were near $1.00/gal was in January of 2009; benzene's all-time low was $0.70/gal in early December of 2008.

The spot mixed xylenes market held up somewhat better than toluene and gasoline, but that is grading on a curve. Downstream PET demand right now is quite high.  People fear that what happened at the Port of Houston (container arrivals being slowed or stopped) could also happen at East Coast and West Coast ports, which would limit availability of PET imports. As bottled water, sanitizer, and cleaning products have been flying off the shelves, producers of their PET containers and bottles are buying PET over contract maximums wherever possible and have ramped up production. Even so, mixed xylenes were offered lower today, slipping below $1/gal as supply will increase now that Citgo's Lake Charles production has restarted.

MX buyers' price ideas are sitting closer to its gasoline blend value, which is under $0.90/gal and opens a theoretical arbitrage to Asia. However, when China and Asia were dealing with lower demand six weeks ago, they sent their MX to the US Gulf Coast, and those cargoes are arriving now. Traders here could get ready to send product back to Asia if prices don’t fall substantially to close to arbitrage.

It's unclear if the US olefins markets have found their market floors, but spot prices barely moved on Monday. Spot polymer grade propylene (PGP) traded down from 19.875 cts/lb (86.45 cts/gal equivalent) to 19.5 cts/lb (84.82 cts/gal), despite the slide seen in propane. Spot ethylene was unchanged, albeit at its all-time low, at 10 cts/lb 29.7 cts/gal equivalent, perhaps a nod to the small gains seen on Monday in ethane.

As with PET, downstream polymer markets are where the slumps stop. Supporting numerous consumer products and medical applications, domestic demand for many grades of polyethylene and polypropylene was robust. Polypropylene, however, has a significant vulnerability from its automotive uses. Spot polyethylene prices were unmoved Monday at 30 cts/gal (89.1 cts/gal) FOB Houston for high-density grade blow-molding and at 29 cts/lb (86.1 cts/gal) for linear low-density grade. Spot homopolymer injection grade polypropylene was 41 cts/lb (178.3 cts/gal) FOB Houston.

--Reporting by Kevin Wallman, kevin.wallman@ihsmarkit.com, Julia Giordano, julia@petrochemwire.com and David Barry, david@petrochemwire.com;

--Editing by Kathy Hall, kathy@petrochemwire.com and Joe Link, joe@petrochemwire.com

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Shell Stops Construction of Pennsylvania Chemical Complex 

March 19, 2020

Citing a commitment to the health of its workers and to contain the spread of the COVID-19 virus, Shell has suspended construction of its world-scale chemical complex in Beaver County, Pennsylvania.  

"We have made the decision to temporarily suspend construction activities at Shell’s Beaver County site, effective March 18th," according to a statement from Hillary Mercer, VP Shell Pennsylvania Chemicals. "In the days ahead we will install additional mitigation measures aligned with CDC guidance. Once complete, we will consider a phased ramp-up that allows for the continuation of safe, responsible construction activities."

Shell announced the final investment decision on the project in June 2016 and construction began in November 2017 at the site on the banks of the Ohio River in Potter Township, near Pittsburgh. The complex includes an ethane steam cracker that will provide ethylene feedstock to three polyethylene units with a combined resin output of 3.5 billion lbs/yr.

The decision comes at a time of historic lows for energy, NGL and olefins prices in the US. Spot ethylene at Mont Belvieu reached a new low of 10 cts/lb this morning; spot propylene was 20.5 cts/lb for polymer grade and 9.5 cts/lb for refinery grade. Spot polyethylene prices have been more resilient, owing to sustained demand from packaging and medical sectors. Spot high-density PE and linear low-density PE were both 30 cts/lb on a bulk railcar basis FOB Houston. 

 

--Reporting by Julia Giordano, julia@petrochemwire.com and David Barry, david@petrochemwire.com;

--Editing by Kathy Hall, kathy@petrochemwire.com and Joe Link, joe@petrochemwire.com

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Ethylene, Propylene Contango Doesn’t Always Sync With NGL Curve Shapes

March 19, 2020

As spot ethylene prices continued hitting new lows, the shape of ethylene's forward curve flipped into solid contango reflecting the weakness. Ethane and propane, however, still showed some backwardation in near-term months, creating higher margins for ethylene in the 2Q market than at any other time of the year. Contango is when the nearer-term month is below an outer month(s); backwardation is when the near-term month is above the outer month(s).

Mont Belvieu-NOVA ethylene ended the day on Friday, March 6, with the remainder of 1H 2020 in backwardation and the balance of the year in contango. As front-month prices cratered this week, however, ethylene's forward month curves slowly started to change shape when the 1H curve flattened and then moved into contango. Forward activity throughout the balance of calendar 2020 woke up on Monday, March 16, and continued for the ensuing days, resulting in 2H 2020 contango narrowing comparatively to the spreads on March 6. As of this morning, March Mont Belvieu-NOVA ethylene prices stood at an all-time low of 10 cts/lb (29.7 cts/gal equivalent).

In the Louisiana ethylene market, March Choctaw ethylene reached its all-time low this morning at 9.25 cts/lb. The Choctaw ethylene curve has been otherwise quiet throughout the recent market turmoil. The front month has decreased on a regular basis starting Monday, March 9, while the curve has remained flat. Wednesday, March 18, experienced the first and only change in shape when 0.125 ct/lb contango was added to the June/July spread in response to a March/3Q offer.

Polymer grade propylene (PGP) forward markets have been more active than normal. March has continuously declined over the course of the last two weeks while the out months have moved into wider contango. Most of the structure changes have been focused around paper strip trades for 2Q 2020, 4Q 2020 and 1Q 2021. Midday prices today showed March Mont Belvieu-EPC PGP at 20.5 cts/lb.

Forward markets for ethane and propane NGLs were in slightly backwardation in near-term months and flipped into contango further out in 2020. Purity ethane (Mont Belvieu TET) in 2Q was nearly 1 ct/gal below March pricing, according to OPIS' NGLs Forwards Report on Wednesday, while 3Q ethane was 2.5 cts/gal above March and 4Q was 4.8 cts/gal above March. The OPIS Global LPG Ticker showed March ethane at 9.875 cts/gal and April 0.125 ct/gal backward to March.

In propane (Mont Belvieu TET), the March/April spread was 0.625 ct/gal backward on Wednesday and the shape moved into contango for April/May, putting 2Q 0.625 ct/gal above March. Steeper contango in 2H 2020 brought 3Q propane 5 cts/gal above March and 4Q propane 9.7 cts/gal above March. The March/April backwardation in propane widened today, with March at 30 cts/gal and April at 26 cts/gal.

Butane's (Mont Belvieu TET) curve was contango throughout 2020, with 2Q prices 3.1 cts above March, 3Q 7.5 cts/gal above March and 4Q butane 11.4 cts/gal above March. Butane's contango was intact today, with March at 26.25 cts/gal and April at 29 cts/gal.

Natural gasoline (Mont Belvieu TET) showed the most pronounced contango in the NGLs complex, with the March/April spread at 4 cts/gal contango, 2Q at 4.5 cts/gal above March, 3Q at 10.8 cts/gal above March and 4Q at 15.2 cts/gal above March. Natural gasoline was also still in full contango today, with indicators for March 0.5 cts/gal below April.

As a result, costs to produce ethylene using ethane were 6.6 cts/lb for March, 5.9 cts/lb in April and 5.7 cts/lb in May.

Costs using propane were 7.1 cts/lb for March, 5.8 cts/lb in April and 6 cts/lb in May.

Costs using butane were 8.5 cts/lb for March, 8.7 cts/lb in April and 8.6 cts/lb in May.

Costs using natural gasoline were 4.9 cts/lb for March, 3.3 cts/lb in April and 3.5 cts/lb in May.

 

--Reporting by Julia Giordano, julia@petrochemwire.com and Kathy Hall, kathy@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

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US Benzene Slumps 22% Amid Pandemic; Styrene and Polystyrene Losses Muted

March 18, 2020

U.S. benzene prices have slumped 22% since coronavirus disease 2019 (COVID-19) was declared a pandemic on March 11, reaching $1.70/gal on Tuesday for prompt delivery, a 50ct slide. Prices have been tracking trends in Europe, which traded down to $460/mt ($1.53/gal equivalent). While benzene supply could be limited if refineries begin cutting operating rates, March benzene shorts are finding an ease to covering, even late in the month. U.S. benzene is expected to be well supplied into April with European Union and Asia import arrivals scheduled amid a weak downstream styrene market.

However, a worsening situation led to continued selling pressure in Europe on Wednesday with benzene prices bottoming out at $335/mt, equivalent to $1.10/gal. That keeps an open arbitrage for benzene from Europe to move to the U.S. Gulf Coast with a landed price near $1.30/gal. The buyers in the Gulf have been hesitant to emerge on Wednesday morning and offers were down to as low as $1.48/gal for May arrivals by lunchtime. The styrene spot price is at a bid level of $455/mt prompt March, $475/mt April and $495/mt May at the moment.

That is down from $500-$550/mt for March and $500-$560/mt for April and May an hour earlier this morning.

Styrene losses have been milder than most markets, as it was a weak market before the pandemic. March spot styrene began the month at 32-33cts/lb., and rested at 29-30cts/lb. this week. Multiple styrene production lines are expected to be down until early April, as well and a cumene line. Cumene is another use for benzene.

An upside for benzene could be if refiners begin to cut CDU and FCC operations that will eventually lead to lower reformer rates. There are also still a few reformer outages for maintenance in March that companies are trying to wrap up by April. The current benzene price is over a 2.6 ratio to crude, which is generally considered to be an indicator of a tight market.

Downstream polystyrene prices have eased, but not to a dramatic degree. This has been the case with U.S. plastic markets in general, as the effects of the upstream routs have not reached the manufacturing level so far. General purpose polystyrene prices have slipped from 68cts/lb. in early March to 66cts/lb. this week, while high impact polystyrene prices have moved from 73cts/lb. to 71cts/lb. Polystyrene has a range of consumer applications, primarily in disposable goods such as food packaging trays and take-out containers. It is also used in the manufacture of appliances, consumer electronics and construction materials.

 

--Reporting by Kevin Wallman, kevin.wallman@ihsmarkit.com, David Barry, david@petrochemwire.com;

--Editing by Kathy Hall, kathy@petrochemwire.com, Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


 

US Propylene Price Slide Continues; Polypropylene Reaction Is Slow

March 17, 2020

 Refinery grade propylene (RGP) has seen a steep drop over the past week and a half in response to the current market turmoil.

Last week, March MtB-EPC pipeline refinery grade propylene (RGP) showed no reaction to energy markets or the COVID-19 situation on Monday until a trade was reported late in the day at 15cts/lb (65.25cts/gal). This represented a 9.1% decrease at the start of the week. The RGP market traded lower again on both Tuesday and Wednesday at 14.5cts/lb (63.075cts/gal) – and even lower on Thursday at 12cts/lb (52.2cts/gal). March ended the week on Friday offered at 11.5cts/lb (50.025cts/gal), representing a 30.3% drop for the week.

Yesterday, RGP matched its historical low when it traded at 10cts/lb (43.5cts/gal), bringing the decline down to 39.4% or 6.5cts/lb (28.275cts/gal). Its previous low mark of this value was seen on December 1, 2008. 

RGP is a byproduct of an FCC. It is hard to imagine increased RGP production in that fluid catalytic cracker economics are so dismal. An FCC margin is calculated by comparing the cost of the vacuum gasoil feed (WTI plus a differential) to the value of the products produced (70% gasoline and 30% diesel).

After having fallen to negative numbers Monday, the margin improved to about $3.06/bbl on Tuesday (the price of vacuum gasoil fell precipitously) but consider last year at this time it was $13.55/bbl.

A new market has emerged for VGO however, as it can be blended into very low sulfur (0.5%S) bunker fuel, which is now the dominant grade of fuel for large, ocean-going ships worldwide.

On Monday, VLSFO into ships was assessed by the OPIS Global Marine Fuels report at $280/mt, the equivalent of $42.79/bbl. VGO by contrast was rated about $4/bbl over WTI, or 30.95/bbl. Add a margin of $3.06/bbl to the cost of VGO inputted to an FCC and you get a value of $34.01/bbl. So the refiner would make $42.79/bbl if the barrel ends up as bunkers.

All this means is that FCC inputs are going to be limited. It is hard to run an FCC at below roughly 85% of capacity, so the production of RGP (as a byproduct of cat cracking) is going to be limited, which could tighten RGP supply.

But for the time being, both raw and finished grades of propylene are seeing selloffs.

Spot polymer grade propylene (PGP) prices have fallen drastically. Last week, March MtB-EPC polymer grade propylene (PGP) ended the day on Monday with an implied value of 25.375cts/lb (110.4cts/gal). This represented a 3.375cts/lb (14.6813cts/gal), or 11.7%, decrease from Friday's close. Higher bids emerged on Tuesday and Wednesday, showing some opportunity for upside.

Those two days closed at 26.5cts/lb (115.275cts/gal). Things took another turn on Thursday when March MtB-EPC PGP traded at 25cts/lb (108.75cts/gal) early in the day. The front month continued to get offered down throughout the day, until March MtB-EPC PGP traded at 23.5cts/lb (102.225cts/gal) minutes before close. By Friday evening, March MtB-EPC PGP closed with an implied value of 23.5cts/lb (102.225cts/gal) and traded slightly higher late in the day at 24cts/lb (104.4cts/gal).

If there were any hopes for an increase in pricing based on Friday’s trade, they were quickly erased when PGP traded at 22.5cts/lb (97.875cts/gal) yesterday. PGP is now down 21.7% from the start of the last week’s decline.

PGP hasn't seen prices near this low since it closed at 24cts/lb (104.4cts/gal) on January 21, 2009; however, PGP's recorded low closing price is 15 cts/lb (65.25 cts/gal) from December 11, 2008. These two previous lows coincide with significant downturns in broader financial and energy markets.

The ultimate demand for PGP rests with the polypropylene market, where spot prices have been slow to react. A raft of polypropylene plant issues and maintenance in 1Q has kept supply tight, supporting prices. Wide spec PP prices, usually the most volatile indicator of supply and demand, have held firm or even increased in recent weeks.

Some high-demand types of wide spec material have been bid above where prime contract prices are projected to settle in March, another sign of the tight supply. Resale pricing for wide spec PP has ranged from 40-48 cts/lb for delivered railcars, depending on the quality and type of resin. Generic prime HoPP injection resale pricing currently stands at 47-49 cts/lb delivered.

Traders expect PP supply overall to remain snug for the next 2-3 weeks, and there is some caution that the market could flip rapidly from short to long. Formosa in Point Comfort, TX and Phillips 66 in Linden, NJ, are in the process of restarting or have just restarted units from outages that lasted at least a month. Other PP suppliers are working to catch up after operating issues earlier in 1Q. In addition to improving operating rates at existing PP plants, Braskem is expected to bring online a new world-scale PP reactor in La Porte, TX towards the end of 2Q.

--Reporting by Julia Giordano, julia@petrochemwire.com, David Barry, david@petrochemwire.com and Robert Sharp, robert@petrochemwire.com

--Editing by Kathy Hall, kathy@petrochemwire.com and Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


 

US Olefins Prices End the Week at or Near Historical Lows

March 13, 2020

US petrochemical markets took a hit this week as a result of the falling energy markets. Some products managed to stabilize early on while others continued to fall as the weekend neared, with propylene seeing the most dramatic drop.

After starting the week off with a fast decline, ethylene markets in both Texas and Louisiana appeared to have leveled out. By market close on Monday (March 9), March MtB-NOVA ethylene was down 7.4% from the March 6 value, settling at 12.5cts/lb (an equivalent of 37.1cts/gal). MtB-NOVA ethylene was last seen closed at this level on June 10, 2019, shortly after it reached a recorded low of 11.75cts/lb (34.898cts/gal) June 3-4, 2019.

Though it took a sharp drop on Monday, March MtB-NOVA ethylene was quiet for the remainder of the week until it traded early Friday at parity to assessed value of 12.5cts/lb (an equivalent of 37.1cts/gal). March Choctaw ethylene was down 1.125cts/lb (3.3413cts/gal), or 8.6%, at 12cts/lb (35.6cts/gal) by end of day Monday. Choctaw markets were quiet throughout the week, until the March MtB-NOVA/Choctaw ethylene spread traded on Thursday at a 1ct/lb (2.97cts/gal) premium on MtB-NOVA. This lowered the March Choctaw implied value even further to 11.5cts/lb (34.2cts/gal) for a total downturn of 12.4% so far this week.

The previous low-water mark for Choctaw ethylene was last seen June 3-5, 2019, when the product closed at a level of 12.125cts/lb (36.011cts/gal). The low ethylene prices in June 2019 were the result of an increase in supply, a decrease in demand and decreasing upstream prices. With near-term pricing at an equivalent of $275-$280/mt FOB Mt Belvieu, the arb remained wide open for shipments to flow to any other global market.

Purity ethane is on track to end the week around 5% lower from last Friday's close, although this percentage is colored by the extremely low absolute price levels from which the product is currently staging its rallies and collapses. Nonetheless, ethane this week also exhibited the extreme volatility that has been the hallmark of the equity-energy complex this week, recording sharp swings.

At around 10 a.m. CDT Friday, the spot price for the Mont Belvieu purity grade ethane had traced a range of 13.25-13.625cts/gal for an implied end-of-day average of 13.4375cts/gal. This would represent a 4.87% drop from the OPIS-assessed end-of-day average of 14.125cts/gal on March 6. However, today's price action would consolidate a smart rebound of around a cent from the low of 12.5cts/gal that Mont Belvieu purity ethane had recorded on March 9, the first day of the week.

The OPIS-assessed end-of-day average price had swung to an intra-week high of 14.625cts/gal at close on Wednesday, March 11, a 17% jump in two sessions -- again, from a lowly base -- over the March 9 low.

pcw 0313

Spot propylene prices fell drastically this week. March MtB-EPC polymer grade propylene (PGP) closed the day Monday with an implied value of 25.375cts/lb (110.4cts/gal). This represented a 3.375cts/lb (14.6813cts/gal), or 11.7%, decrease from Friday's close. Higher bids emerged on Tuesday and Wednesday, showing some opportunity for upside. Those two days closed at 26.5cts/lb (115.275cts/gal). Things took another turn on Thursday when March MtB-EPC PGP traded at 25cts/lb (108.75cts/gal) early in the day. The front month continued to get offered down throughout the day, until March MtB-EPC PGP traded at 23.5cts/lb (102.225cts/gal) minutes before close. By Thursday evening, March MtB-EPC PGP was down 18.3% for the week. PGP hasn't seen a price near this low since it closed at 24cts/lb (104.4cts/gal) on January 21, 2009; however, PGP's recorded low closing price is 15 cts/lb (65.25 cts/gal) from December 11, 2008. These two previous lows coincide with significant downturns in broader financial and energy markets.

PLASTICS PRICES EASE, STABILIZE

Polyethylene spot prices have slipped by 1-2 cents/lb from late February, but the market was quiet as traders stayed on the sidelines and producers were not aggressively offering material. Further downward pressure was seen on polyethylene values, but some participants suggested it would take another week or two to establish new price levels. US suppliers appeared to have HDPE blow mold and injection grades available for export, while HMWPE film and LDPE film grades were less readily available. HDPE blow mold pricing was at 30cts/lb (89.1cts/gal) on an FOB bulk railcar basis in Houston; that market had been flat at 32cts/lb (95cts/gal) throughout February.

Container logistics were cited as a potential limiting factor for export business. Empty containers were lacking in the U.S. Gulf Coast region, mainly due to COVID-19's disruption of trans-Pacific shipments. Cargo arrivals to the US West Coast from Asia were on the uptick, but by some estimates it would take 45 days to relocate the newly emptied containers to the US Gulf Coast. Meanwhile, some empty containers were being relocated from the East Coast to Houston at a rate of $500 per container.

Polypropylene spot activity was limited by tight supply, but that dynamic was expected to shift fairly quickly with the conclusion of some major planned and unplanned outages in the second half of March. PP buyers were watching for downward price pressure from the propylene and further upstream markets. HoPP injection spot prices were down 1 cent from last week at 41cts/lb (178.4cts/gal) railcar FOB Houston.

The PVC market was not immune from the economic and societal upheaval this week that was caused by the COVID-19 coronavirus pandemic. Producers and converters alike were concerned about keeping their workforces healthy, but converters pointed out they did not have the option of having their manufacturing personnel work from home.

The economic fallout from the virus was a concern, as people who work for businesses that have slowed down or shut down will most likely delay purchasing a new house or paying for home remodeling, thus reducing domestic demand for PVC. News of industries, companies and schools shutting down for various lengths of time started out as a trickle early in the week but had become a torrent by the end of the day Thursday. Resin producers said how long the pandemic lasts will determine how much PVC demand could be reduced.

REFINERY-BASED CHEMS HIT HARD

Chemicals more directly tied to refining economics, refinery grade propylene and benzene, also saw new lows this week, although benzene's declines were not as dramatic as for RGP.

March MtB-EPC pipeline refinery grade propylene (RGP) showed no reaction on Monday until a trade was reported late in the day at 15cts/lb (65.25cts/gal). This represented a 9.1% decrease at the start of the week. The RGP market traded lower again on both Tuesday and Wednesday at 14.5cts/lb (63.075cts/gal) – and even lower on Thursday at 12cts/lb (52.2cts/gal), representing a 21.2% drop for the week. The last time MtB-EPC pipeline RGP traded at this low of a value was on December 11, 2008. Its historical low was seen a few days before that when it traded at 10cts/lb (43.5cts/gal) on December 1, 2008.

The spot benzene market held up slightly better than some of the energy markets. WTI crude prices were down by $1.50/bbl but Brent and RBOB prices fell more than WTI did. Limited supply kept benzene prices from falling further on Thursday. There remained some nominations still out for March delivery as traders waited for barrels to arrival on vessel. The fog in the US Gulf Coast had slowed nearby ships and the low water at the Panama Canal was delaying Asia vessels by 10-15 days as well. Eventually the material will arrive, but there are worries that March arrivals could slip to April and April arrivals slip to May. The styrene buyers were still pulling hard as refinery turnarounds and low imports in January and February have kept balances tight. Now that energy has fallen, the next shoe to drop will be the expandable polystyrene and polystyrene buyers pushing back on domestic styrene buying and again de-inventorying, similar to end of last year. The expectation of lower prices for April and May will lead to the expected push back on demand. Styrene producers have already lowered rates and will not be able to lower much further without shutting down or keeping lines that were in turnaround down for extended periods. Early in the day Thursday, April benzene traded at $1.95 and May Port Arthur at $1.90/gal. However, the market thinned afterwards, and everyone sat on their hands as energy and equities gyrated. The bids were below $1.90/gal for the rest of the day for April and May as EU had deals done prompt at $515/mt, which netbacks to near $1.90/gal for US Gulf Coast arrival in April.

--Reporting by Julia Giordano, julia@petrochemwire.com; David Barry, david@petrochemwire.com; Donna Todd, donna@petrochemwire.com; Rajesh Joshi, rjoshi@opisnet.com; and Kevin Wallman, kevin.wallman@ihsmarkit.com;

-Editing by Kathy Hall, kathy@petrochemwire.com; and Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


 

Propylene May Have More Crude-Related Downside; PE Less So: IHS Markit

March 11, 2020

While crude and refined products markets rebounded somewhat on Tuesday (March 10), US propylene's comeback was relatively mild after taking an 11-12% hit on Monday. Polymer grade propylene for March delivery at Mont Belvieu tumbled from 28.75 cts/lb a range of 25.25-25.5 cpp; it was bid up to 26.5 cts/lb Tuesday in a thin market. This begged the question: is there more to come, or had the market found a floor?

pcw 0311

There could be more downside if oil moves even lower, posits Carlo Barrasa, Executive Director of Propylene Research at IHS Markit, as tanking oil prices are just one more bearish fundamental for propylene. 

"Typically, when we examine rapid price declines, we look at matching price patterns and historical analogs to determine likely pricing behavior," Barrasa said. "When news broke that oil prices fell dramatically overnight, we prepared ourselves to see propane prices at around 30 cents, which is what has happened thus far."

Looking to the past to gauge how propylene has behaved, Barrasa noted that "the best analog was the winter of 2016, extreme oversupply of propane plus very weak demand with WTI prices of around $31/bbl, very much like today. On the propylene side, this same analog resulted in a PGP price of 30 cpp (in January 2016)."  

However, unlike the 2016 market, the geopolitical factors regarding oil are combined this time around with the coronavirus influence and high propylene inventories. Barrasa pointed to the early 2009 propylene market, which reacted to a number of varying fundamentals against a backdrop of broader financial market crashes and found a floor at 24.75 cpp. "My sense is that propylene prices have downside risk to roughly mid-20s cpp, but it’s a challenging price to determine because there really is no historical analog to verify this price," he said. "The 1980s, 1990s and early 2000s were totally different fundamental environments for propylene."

Spot ethylene was similarly quiet, after shedding 7% of its value on Monday. March spot prices at Mont Belvieu were pressed down to 12.5 cts/lb, and not even ethane's mild rally lifted them back up on Tuesday. Spot high density polyethylene prices held steady at 30 cts/lb for FOB Houston.

"US ethylene prices remain above ethane cash costs; however, increasing supply length amidst sluggish demand offers limited support for prices," according to IHS Markit's North American Light Olefins most recent weekly advisory report, issued last Friday.

On the downstream polyethylene side, demand will shrink based on recent fundamentals, but the US price is still the most competitive on earth. This limits downside to the US market, noted Nick Vafiadis, Vice President of Plastics and Chemicals at IHS Markit. 

"Based on current expectations it appears that the dramatic drop in crude oil prices will result in a near term decline of about $100-150 per ton on PE prices in China," he said. "While COVID-19 is expected to negatively impact global demand by as much as 1 million tons or more this year, US producers are expected to remain globally competitive in a $30/bbl oil environment despite the compression in ethane to naphtha price spread, so we don’t expect to see a backup in exports."   

 

--Reporting by Kathy Hall, kathy@petrochemwire.com,

--Editing by Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service 


 

Crude Oil Crash: US olefins price drop amid upstream panic

March 9, 2020

U.S. petrochemical markets were not immune to the sharp sell-off in energy markets Monday. Ethylene and propylene activity was thin, but offers kept dropping, while spot market offers for polyethylene and polypropylene all but disappeared.

pcw 0309Ethylene was lower in both the Texas and Louisiana markets. March MtB-NOVA ethylene was down 7.4%, from Friday's close at 12.5cts/lb (an equivalent of 37.1cts/gal). MtB-NOVA ethylene was last seen at this level on June 10, 2019, shortly after it reached a recorded low of 11.75cts/lb (34.898cts/gal) June 3-4, 2019. March Choctaw ethylene was down 1.125cts/lb (3.3413cts/gal), or 8.6%, at 12cts/lb (35.6cts/gal). The low-water mark for Choctaw ethylene was seen June 3-5, 2019, at a level of 12.125cts/lb (36.011cts/gal). The low ethylene prices in June 2019 were the result of an increase in supply, a decrease in demand and decreasing upstream prices. With near-term pricing at an equivalent of $275-$280/mt FOB Mt Belvieu, the arb remained wide open for shipments to flow to any other global market.

The only respite may have come from a drop in the price of Mont Belvieu purity ethane, though in the larger context of the day this may amount to pocket change. The steam cracker feedstock dipped 11.5%, in today's trading, tracing a price range of 12-13cts/gal on fairly respectable publicly confirmed volumes of 230,000 bbl.

The percentage decline was in line with price erosions seen today in the wider energy complex. However, Gulf Coast cracking demand was projected to soften this month even before the crude oil meltdown at the weekend. Dow is expected to take its TX-9 cracker offline ahead of an expansion, and Ineos is expected to put its Chocolate Bayou Olefins 2 plant into maintenance. Together, these events are projected to clip total estimated Gulf Coast ethane demand of 1.8 million b/d by some 5%.

If COVID-19 fears cause overseas ethylene plants that feed US ethane to scale back operations, this could depress ethane exports and add to the downward pressure on the spot ethane price. Against this backdrop, regardless of cash-cost economics vis-a-vis Gulf Coast ethylene, some experts expect the ethane price to continue to shadow the natural gas price in the near term.

Spot propylene prices slumped on a combination of lower front-month offers and lower forward paper activity, giving March MtB-EPC PGP an implied value at market close of 25.375cts/lb (110.4cts/gal). This represents a 3.375cts/lb (14.6813cts/gal), or 11.7%, decrease from Friday's close. PGP hasn't seen a price near this low since it was at 25.875cts/lb (112.5563cts/gal) Sept. 8-10, 2015; however, PGP's recorded low is 15 cts/lb (65.25 cts/gal) from Dec. 11, 2008. These two previous lows coincide with significant downturns in broader financial and energy markets.

The spot benzene market also followed energy prices lower. While the spat between OPEC producers Saudi Arabia and Russia pushed down crude WTI by more than $10/bbl and gasoline prices down by more than 20cts/gal, benzene traders planted themselves on the sidelines. Buyers didn’t attempt to catch a falling knife and preferred to see where prices settle on the energy side first before making their calls. That led to a wide range for benzene for most of the day. Bids for March were sitting near 200cts/gal for most of the day before slowly increasing to over 202cts/gal in the afternoon. Sellers hoping for a quick energy rebound held offers for March closer to 220cts/gal. While that is a wide range, it still is a price decline of nearly 25cts/gal for benzene from Friday. The March/April spread is backwardated by 6-7cts/gal and Apr/May is 3-4cts/gal. 

Little has changed yet from a supply/demand picture on benzene. Additional barrels are headed this way from Asia as China began pushing back on benzene in early February, also related to the COVID-19 virus. China is just now beginning to ramp up rates and logistic issues are being smoothed out in that region. That is a relief as paraxylene producers were filling tanks rapidly and needs China to be able to take in imports. However, there is already some production that has been lowered and that could limit supply moving to the U.S. Gulf Coast for March and April loadings. 

Polyethylene spot markets were edging lower in the first week of March, but traders did not see any immediate reaction to Monday's sell-off in commodities, other than a drop-off in customers' buying interest. U.S. suppliers appeared to have HDPE blow mold and injection grades available for export, while HMWPE film, LLDPE film and, especially LDPE film, grades were less readily available.

HDPE blow mold pricing was last seen at 30-31cts/lb (89.1-92.07 cts/gal) on an FOB bulk railcar basis in Houston; that market had been flat at 32cts/lb (95cts/gal) throughout February.

While PE producers have yet to step out with more aggressive offers, traders were feeling the pressure to trim their inventories. Container logistics were cited as a major concern. Empty containers were lacking in the U.S. Gulf Coast region, mainly due to COVID-19's disruption of transpacific shipments. Shipping companies have canceled outbound bookings, particularly to Asia, and there were concerns that customers will opt to cancel orders when shipments are postponed by logistical problems. This could result in PE cargoes backing up and being sold more aggressively in other parts of the market.

PP spot activity was muted early in the week, and the market has been viewed as short for most of 2020 so far due to planned outages and production issues. PP buyers were watching for downward price pressure from the propylene and further upstream markets. HoPP injection spot prices finished last week at 42cts/lb (182.7cts/gal) railcar FOB Houston.

The U.S. PVC market is somewhat protected at this time from the plunge in oil pricing and the drops in spot and ethylene pricing by the fact that several VCM plants have been having production problems and there has been downtime during 1Q at certain PVC plants. The resulting perceived tightness in the PVC market has enabled PVC producers to attain a 3cts/lb contract price increase in January and the likely implementation of at least a 2cts/lb price hike for February in the face of a 5.75cts/lb drop on contract ethylene prices since October 2019. The PVC market is nearly all contract-based, and it would not see any movements until the March price is retroactively set.

If oil prices remain low for a considerable time, however, PVC producers will lose their cost advantage over European and Asian suppliers, resulting in fewer export opportunities and a surplus of resin backing up into the domestic market. Export prices were in the $840-$855/mt range, an equivalent of 38-38.75cts/lb FAS Houston. In addition, any longer-term effects on the stock market and jobs numbers could impact construction activity, especially for homes, which would affect domestic demand for PVC since the majority of PVC production goes into building materials.

 

--Reporting by Julia Giordano, julia@petrochemwire.com; David Barry, david@petrochemwire.com; Donna Todd, donna@petrochemwire.com; Rajesh Joshi, rjoshi@opisnet.com; and Kevin Wallman, kevin.wallman@ihsmarkit.com;

--Editing by Kathy Hall, kathy@petrochemwire.com; and Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service 

 

COVID-19: AFPM IPC Conference in March Still Scheduled to Take Place as Companies Withdraw Participation

March 6, 2020

The 2020 American Fuel & Petrochemical Manufacturers International Petrochemical Conference (AFPM IPC) is still scheduled to take place on March 29-31 in New Orleans, Louisiana, according to an announcement released by the organization on Wednesday.

“At this time, we still plan to proceed as scheduled with this year’s IPC March 29-31 in New Orleans, LA. We will continue to consult with federal, state, and local officials about the risks posed by the Novel Coronavirus Disease 2019 (COVID-19), and will advise you if the status of the meeting changes,” the announcement stated.

Though the conference is still scheduled to occur, many companies are withdrawing their participation citing concerns over COVID-19. Cocktail reception and company meeting cancellations have been trickling in throughout the week, including the cancellation of OPIS PetroChem Wire’s joint crawfish boil with the CME. Kolmar Americas, Inc. announced in a Cocktail Party cancellation notice on Wednesday that, “Regretfully due to the current Coronavirus outbreak Kolmar has decided not to attend AFPM this year.” A Shell Chemicals Reception was canceled on Friday with a note stating, “As concerns over COVID-19 continue to grow and impact customer and partner attendance, Shell Chemicals has decided to withdraw from the 2020 AFPM Conference in New Orleans.”

For several companies that haven’t officially cancelled, some employees have said they are hesitant to travel because of concerns for their own well-being. Moreover, some companies have issued international and domestic travel bans as the virus continues to spread.

The impact the virus has had on petrochemical production has mostly been seen in Asia, and this region is starting to see a rebound from its initial operational cuts from the beginning of this year.

A recent report released on Feb 28 by IHS Markit, the parent company of OPIS, titled "COVID-19 Weekly Focus Report: Status & Implications" stated that "Although COVID-19 continued to impact ethylene production in the week, some producers started to gradually increase their operating rates following improved demand for derivatives production. The operating rate of those downstream-integrated CTO and crackers was recovering in most regions of China. However, ethylene net sellers remained under high inventory pressure and continue to run at a reduced rate." CTOs are coal-to-olefins plants.

The report also said, “Although the demand recovery among converters remained slow, the product inventory pressure among ethylene derivative producers eased during the week. Traffic restriction in most regions of China has moderated, thus facilitating product movement. Some MTO players who were running at reduced rates have started to purchase spot cargoes for their derivatives production.” MTOs are methanol-to-olefins plants.

The propylene market in the region appears to be slower to rebound. The IHS Markit report says that “On-purpose propylene operating rates in China remained low. Tianjin Bohai and Shandong Shenchi postponed the restart of their PDH unit by a month to late-March. Other PDH units in Shandong were still running at a reduced rate. Independent refineries in the region have not yet recovered from unplanned outages at the time of writing. PDH units in East and South China, including Dongguan Grand Resource, Shaoxing Sanjin, Ningbo Fuji and Yangzijiang PC which are integrated with propylene downstream, have recovered and raised their operating rates.” In addition, the report adds that “Propylene demand remained slow, although some downstream producers resumed sourcing propylene from the domestic market this week. OXO-alcohol producers stepped back from the market due to a deteriorated margin, while the buying interest among PP powder producers remained slow.”

The AFPM IPC conference attracts approximately 3,000 industry participants from around the world. The theme of this year’s 45th annual conference is centered around “sustainability and the future of the petrochemical industry.”

--Reporting by Julia Giordano, julia@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


 

 

LyondellBasell to Invest in China Polyolefins Venture

March 6, 2020

LyondellBasell today announced it has finalized its agreement to form an olefins joint venture in Panjin, China with the Liaoning Bora Enterprise Group, giving it a domestic foothold in the fast-growing Chinese market for plastics.

In the coming months, LyondellBasell will make an equity investment in the 1.1 million mt/yr cracker and polyolefins derivatives complex, which has an expected total cost of $2.6 billion.

Startup of the plant, which is already under construction, is expected in 2H 2020.

LyondellBasell will also market the HDPE and PP output from the complex. Liaoning Bora in 2017 selected LyondellBasell’s Spherizone and Spheripol technologies for the 600,000 mt/yr PP plant, comprising two units, and LyondellBasell’s Hostalen ACP technology for the associated 350,000 mt/yr HDPE unit.

The JV formation is still subject to approval by government authorities, including an antitrust review by the State Administration for Market Regulation.

The PP and HDPE output from the plant is expected to be marketed domestically for packaging, automotive, building and construction, and healthcare and hygiene applications.

According to IHS Markit, China currently represents 40% of global polyolefins demand growth.

China's growing PE appetite was expected to help balance the US petrochemical industry's expansion in recent years, but the US/China trade war has disrupted those plans to some extent.

Last month, the Chinese government added PE and ethylene co-polymers to a list of products for which importers can apply for trade war tariff waivers. Buyers have begun applying for those waivers this week, but current price expectations in China are said to be roughly 3-4 cents/lb below current offers from the US Gulf. 

HDPE blow mold (loop-slurry process) pricing was at 31.5 cents/lb railcar FOB Houston this week, according to OPIS PetroChem Wire.

 

--Reporting by David Barry, David@petrochemwire.com;

--Editing by Joe Link, Joe@petrochemwire.com

 

Copyright, Oil Price Information Service


 

Analysis: The Changing Dynamics in the Texas/Louisiana Ethylene Relationship

February 28, 2020

As spot liquidity in the Louisiana ethylene market grows, the dynamics in its relationship to the spot Texas ethylene market are changing. In Louisiana, the common hub is at Choctaw, operated by Boardwalk Midstream. In Texas, the dominant hub is at Mont Belvieu, operated by NOVA Chemicals.

Looking at the prompt market activity going back to January 2018, MtB-NOVA ethylene had consistently seen higher prompt trade volumes until late 2019. During that time frame, Choctaw experienced months where it had more prompt volume traded than MtB-NOVA, but not on a consistent basis. The trendlines show that MtB-NOVA prompt trade volumes have been decreasing on a steep decline relative to the gradual increase that Choctaw has been seeing over the last two years.

Furthermore, 43 million lbs reportedly traded in the MtB-NOVA well in January 2020, and 40 million lbs reportedly traded in the Choctaw well. This is the closest month of comparative trade volumes seen at the two hubs in this data set. 

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In addition, January 2020 saw frequent broker markets valuing MtB-NOVA at a premium to Choctaw – either in the form of a trade or a bid/offer. These market spreads between MtB-NOVA and Choctaw resulted in implied values of one location based off the other location’s market(s). As a result, Choctaw was assessed by OPIS PetroChem Wire (PCW) based on its implied spread to MtB-NOVA ten times in January; MtB-NOVA was assessed based on its implied spread to Choctaw only four times in that month (all in the latter part of January). 

During this 25-month time frame, Choctaw ethylene had generally maintained a pricing premium to MtB-NOVA ethylene. However, by the end of 2019, MtB-NOVA was valued at a premium to Choctaw. This trend was first seen in the PCW 45-day weighted averages, then in the PCW calendar averages, and lastly in the PCW 30-day weighted averages for the two locations. 

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While this data illustrates that Choctaw had a strong end of the year in 2019 in relation to trade volumes, only time will tell if this trend will maintain its momentum. The same can be said for the pricing premium currently seen at the MtB-NOVA hub versus the Choctaw hub. Month-to-date activity in February shows MtB-NOVA ethylene has been maintaining its premium over Choctaw ethylene for most of the month, with the exception of the two being valued at parity by PCW on February 24 and 25. MtB-NOVA has seen higher month-to-date February prompt trade volumes. 

From a supply/demand fundamentals perspective, Steve Lewandowski, Research and Analysis Executive Director for North American Light Olefins at IHS Markit (PCW’s parent company), points to delayed cracker startups in Louisiana as a partial cause of the increased trade volume seen at Choctaw in 4Q 2019. He also notes that the general flow of ethylene from Texas to Louisiana results in the premiums seen at Choctaw over MtB-NOVA because of the cost to move ethylene east.

Moreover, the industry awaits the upcoming opening of the Enterprise Products’ Mont Belvieu, TX ethylene storage hub (MtB-EPC), which is slated to fully come online in early 2020. Enterprise began initial service of ethylene receipts into the hub in December 2019 and expects full service of both receipts and deliveries to begin in April 2020. The company stated in a January 8, 2020 press release: “Enterprise has designed the system to serve as an open market storage and trading hub for the ethylene industry through storage, connections to multiple ethylene pipelines and high-capacity export capabilities.” 

The world is in the midst of the US market absorbing the effects of the first major investments in North American olefins in decades. As more investment commitments are made, the pricing and trade volume correlations between the major ethylene hubs in the US Gulf Coast ethylene market will continue to evolve.


--Reporting by Julia Giordano, julia@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service 


 

Covid-19: Asia petrochemical conference in May postponed

February 26, 2020

The 2020 Asia Petrochemical Industry Conference (APIC) scheduled to be held May 28-29 in New Delhi, India has been postponed due to travel complications related to the ongoing coronavirus epidemic. 
 
"Our preparations for APIC 2020 were proceeding on track and we were quite excited about holding this event – unfortunately, the global health crisis caused by the Corona virus has led to many countries/companies putting out travel advisories restricting travel of their citizens/employees," according to a communication issued Wednesday by the Secretary General of the Chemicals & Petrochemicals Manufacturers' Association, the organization hosting the conference. "As APIC member countries are from the region significantly impacted, we sought the opinion of APIC steering committee members regarding rescheduling of APIC 2020. All steering committee members were of the opinion to reschedule the event. Accordingly, we are postponing APIC 2020, and now it will no longer be held on May 28-29th of this year as planned." 
 
No new date has been set for the conference. Sponsorships and booths that have been booked will remain intact when the event is held later this year.
 
The effect of the virus on petrochemical production in the region has been dramatic. A recent report issued by IHS Markit noted that "around 60% of the ethylene producers in China have reduced operating rates." The report, called "COVID-19 Weekly Focus Report: Status & Implications," estimated that around 179,000 mt of ethylene production could be lost during February alone. Shutdowns and reductions are also affecting polyethylene, vinyls, glycol and styrene production throughout the region.
 
The effect to propylene production in the region has been similar. The IHS Markit report notes that "around 52% of the on-purpose propylene producers in China have reduced operating rates" and estimates that around 588,000 mt of propylene could be lost during February. Downstream polypropylene, acrylonitrile, propylene oxide, phenol and cumene operating rates are also depressed in the region.

 

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--Reporting by Kathy Hall, kathy@petrochemwire.com;

--Editing by Joe Link, joe@petrochemwire.com

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Spot Ethylene Prices Dip as New Steam Crackers Slowly Come Online

February 19, 2020


Spot ethylene prices in Texas and Louisiana have been slipping this month as the Gulf Coast market continued to slowly absorb new production that has finally started up after delays of more than a year for certain units.

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Shintech's new olefins unit at Plaquemine, LA was "on the verge of starting operation" in early February, according to a statement from the company. This plant has been expected to come online since 2Q 2019. The ethane cracker has the capacity to produce 1.105 billion lbs/yr of ethylene (31,000 b/d in ethane demand) and feeds an onsite VCM and PVC complex. 

Indorama announced that its Lake Charles, LA steam cracker had "reached beneficial operations" in late January. The company purchased an olefins plant in 2015 that had been idled by Equistar in 2001. At the time of the purchase, the company said the plant could start up by the end of 2017. That start-up target slipped to end-2018 and then mid-2019 and end-2019. The company announced on January 31 that the plant achieved commercial startup following protests by residence of Sulphur, LA over noise associated with activities at the plant. Its 970 million lbs/yr of ethylene is designated to feed its own ethylene oxide and ethylene glycol operations and support its global PET operations.

Sasol has also brought a 3.3 million lb/yr (93,000 b/d ethane demand) new world-scale olefins plant fully online after struggles in 2019 that escalated to a point where the company's executive management issued a statement in Octobere 2019 describing "a lack of competence" associated with the project that resulted in the departure of several executives at the time. 

Unlike Shintech and Indorama, Sasol has operated a world-scale olefins plant and complex of downstream chemical plants in the US since 2001 with its purchase of certain assets from Condea Vista. Sasol's new plant is on the company's Lake Charles, LA site. Its 2.2 billion lbs/yr of ethylene output feeds new downstream ethylene glycol and polyethylene plants. The steam cracker, which had been expected to start up in early 2019, started up in a limited capacity in August 2019. The company stated at the time that the plant would run at 50% rates as the capacity allocated to the onsite polyethylene units would not be used until those plants started up. The PE plants started up at the end of 2019 but a fire at one of the plants in January caused more delays at the site. As of mid-February, all units were said to be operating at normal rates with the exception of one low density PE plant.

Formosa's new Olefins III unit at Point Comfort, TX did not experience the long delays and challenges that other companies experienced in 2019. The company had originally targeted starting up during 2H 2019. In November 2019 the company issued a statement that the steam cracker would start up by the end of December. In mid-January, the company issued an update that the olefins unit and two polyethylene plants would start up by the end of the month. Formosa is also no stranger to US chemical manufacturing - it has been in Point Comfort since the early 1980s. It built its first cracker at the site in 1994 and built a second cracker there in 1998. The new plant's 2.75 billion lbs/yr ethylene capacity (77,000 b/d ethane demand) will feed new polyethylene plants. 

Coming up, Dow Chemical's TX-9 olefins plant at Freeport, TX is expected to start up new furnaces during 2Q 2020. The plant is one of the Gulf Coast's newer units, starting up in 2017. The new furnaces will increase the plant's ethylene capacity by 1.1 million lbs/yr, bringing it to 4.4 billion lbs/yr and making it one of the largest olefins units in the world. The addition represents only 31,000 b/d of new ethane demand yet to materialize.

Since the start of 2020, spot ethylene prices have moved from the 20-21 cts/lb range (an equivalent of 59.4-62.4 cts/gal) to 14-15 cts/lb (41.6-44.6 cts/gal), a loss of 30% in just six weeks. While low, current pricing is still above lows reached in 2019 of 12 cts/lb (35.6 cts/gal).

Spot ethylene's main price driver has been the balance of new production coming online with associated downstream units, primarily polyethylene, vinyls and ethylene glycol. The downstream markets have faced their own unexpected challenges in 2019 with trade wars between the US and China that have caused a number of tariffs to be enacted and have hampered export volumes from the US as a result. That said, Enterprise’s new ethylene export terminal has enabled regular loadings of cargoes since late December, mostly bound for Europe. This has tempered the threat of a glut of ethylene sitting in the US.

Even at these low prices, ethylene is still a profitable commodity. Ethane, the most popular and commonly used ethylene feedstock in the US, has generally been in the 13-16 cts/gal range, which translates to a cash cost of 7-8 cts/lb. Propane has moved in and out of favor as an ethylene feedstock and is currently gaining in popularity as its own cash cost is around 10 cts/lb, and its use yields more propylene from the cracker as a co-product. With spot propylene currently priced at 29-30 cts/lb, propane has overtaken ethane at certain sites that can switch furnace use to accept the feedstock. 

 

--Reporting by Kathy Hall, kathy@petrochemwire.com; David Barry, david@petrochemwire.com and Rajesh Joshi, rjoshi@opisnet.com;

--Editing by Joe Link, joe@petrochemwire.com

Copyright, Oil Price Information Service


Propane Comes Into Favor as Cracker Feedstock

February 18, 2020

A conceivable scenario may explain, at least in part, the large decline in propane-propylene inventories in last week's government data release that caught some market watchers by surprise.

According to this hypothesis, the steady creep of propane over the past month as the most advantageous feedstock at steam crackers finally might have worked its way into reported domestic demand and inventory numbers.

The distressed price of purity ethane at present would complete this jigsaw.

According to the Energy Information Administration's (EIA's) weekly data release last Wednesday, nationwide propane-propylene stocks declined by 6.18 million bbl in the seven days ending Feb. 7, from 83.45 million bbl to 77.27 million bbl. This represented a drop of some 7.4% in one shot.

A large portion of this draw, 4.35 million bbl, was in PADD3 (Gulf Coast). This already oversupplied region, which holds almost the entire year-on-year inventory surplus nationwide, saw stocks subside from 57.68 million bbl to 53.33 million bbl.

These numbers elicited more than one reaction of surprise among market watchers. But this magnitude of draw between the last week of January and the first week in February has not been that uncommon of late, both at the nationwide and PADD levels.

For example, in 2017, according to EIA historical data, the dip was larger than the one seen last week in absolute as well as percentage terms: a 6.88 million bbl (11%) draw, from 62.65 million bbl to 55.77 million bbl. Again, PADD3 accounted for much of the 2017 erosion -- a 4.69 million bbl draw, from 38.25 million bbl to 33.56 million bbl.

Corresponding January-into-February weekly draws were comparatively more moderate in 2019 and 2018 (nationwide declines of 4.38% and 7.77% respectively), but did not buck the trend.

Meanwhile, domestic demand in the Energy Information Administration's (EIA) Feb. 7 dataset, which is represented by the "products supplied" number in the report, rose a whopping 68%, or by some 850,000 b/d, from 1.24 million b/d in the Jan. 31 week to 2.09 million b/d in the Feb. 7 week.

Domestic production and exports for the Feb. 7 week were within the wheelhouse of recent averages. Besides, received wisdom in the market generally is that domestic demand for propane is at a plateau, and exports are the main avenue to lower stocks.

This made the latest demand number stick out, at least in arithmetical terms, as the apparent mover of the needle when it came to the outsized inventory draw.

However, it is equally interesting to note that EIA-reported demand has spiked from the last week of January to the first week of February in both 2019 and 2018. In fact, weekly demand from the first weeks in February for 2019 and 2018 was almost identical to this year's 2.09 million b/d: 1.99 million b/d (up 23.2% week on week) and 2.01 million b/d (up 31.1%), respectively.

Thus, it turns out that neither the inventory draw nor the surge in reported demand in the latest "surprise" EIA dataset was unprecedented. Nonetheless, this year's developments may have been tinged by a new and recent phenomenon: propane displacing purity ethane as economically the most viable feedstock at steam crackers -- of which almost the entire fleet in the United States resides along the Gulf Coast.

It is worth stressing at the outset that short-term variations in prices alone do not automatically lead to mass feedstock switching at crackers. This could be because of cracker specifications, feedstock storage availability at the operator, etc. Nonetheless, one can see the attraction of a switch to propane just by looking at spot market values for ethylene and propylene.

According to OPIS PetroChem Wire daily pricing data, spot ethylene has been in the 15-16cts/lb. range for much of February, while spot polymer-grade propylene has been in the 29-30cts/lb. range.

Propylene is generally at a premium to ethylene in the United States, as there is far less propylene production capacity than there is for ethylene. While steam crackers are designed to primarily produce ethylene, furnaces that can accept a variety of natural gas liquids (NGLs) can produce varying amounts of co-products.

Ethane is a feedstock that maximizes ethylene output: cracking it produces almost nothing but ethylene. On the other hand, cracking propane yields 15%-20% propylene, and reduces ethylene output to around 50% (the rest of the output is other co-products such as hydrogen).

Current OPIS PetroChem Wire-assessed ethane-based cash costs for olefins production stand at 7-8cts/lb. for February and March. These are handily lower than propane-based cash costs at 10-11cts/lb. However, the attractiveness of ethane based on these numbers alone may not be self-explanatory.

The more nuanced pursuit of limiting ethylene output and increasing availability of the much higher priced propylene might have tipped the scales in propane's favor, at least at the more flexible operators.

According to data from En*Vantage Inc., as of last week propane was the most preferred feedstock at high-severity cracking conditions, yielding a spot net margin of 8.5cts/lb. versus 7.3cts/lb. for ethane (based on a spot Mont Belvieu ethylene price of 15.5cts/lb.) Butane and naphtha yielded margins of 4.8cts/lb. and minus 14.2cts/lb., respectively.

OPIS-assessed spot Mont Belvieu prices provide context. According to the North America LPG Report on Feb. 14, the month-to-date average price for all three assessed grades of propane was 37.8626cts/gal, versus 64.4771cts/gal for the same day in 2019, i.e., a 41.3% decline year-on-year. Front-month WTI crude ended the respective sessions at $52.05/bbl this year and $54.41/bbl in 2019, i.e., only 4.3% lower this year, which highlights the depths to which Gulf Coast propane prices have currently fallen.

"It's real," one steam cracker industry expert said against this backdrop on Thursday last week. "With propane becoming the most favored feedstock a few weeks ago, it took a few weeks for all of us to get swapped over to more C3 feed."

Though the exact reason behind the 850,000-b/d increase in domestic demand from Jan. 31 to Feb. 7 this year may still be hard to pinpoint, he said this increase theoretically "is within the Gulf Coast cracker fleet's ability to switch from ethane to propane."

Alluding to the lag between the time this switch happened and when it actually began to show through in EIA statistics, he noted: "Big ships turn slowly."

In the same vein, he suggested that the 4.35-million-bbl draw in regional PADD3 inventories for the Feb. 7 week may have had to do with a couple of cracker operators moving barrels out of commercial storage (which the EIA reports cover) to proprietary storage (which the EIA reports do not cover) closer to their crackers, for ease of use.

This scenario may arguably be theoretical. But purity ethane is the unfortunate victim in real terms.

This is reflected in the Feb. 14 OPIS-assessed month-to-date average Mont Belvieu price of 13.8566cts/gal, compared with 32.1251cts/gal on the same day a year ago -- a 56.9% slide year-on-year.

Anecdotal comments from the market last month had suggested a potential hit of 50,000-100,000 b/d on regional feedstock demand for ethane because of the creeping attractiveness of propane.

However, purity ethane's current pricing woes stretch beyond this factor alone.

The product endured a stark second half of 2019, which saw the OPIS-assessed price dip below a dime for a brief while at the end of July, the lowest point since assessments began in 1984.

Ethane faces other headwinds on the Gulf Coast: surging inventories, weak natural gas values, the imminent arrival of new fractionation capacity, and not that many new steam crackers remaining for startups.

The challenge from propane does not come at a good time for ethane as a result.

Some pundits project that the Mont Belvieu price may test the 10cts/gal level again.

 

--Reporting by Rajesh Joshi, rjoshi@opisnet.com, Kathy Hall, kathy@petrchemwire.com;

--Editing by Michael Kelly, michael.kelly3@ihsmarkit.com

Copyright, Oil Price Information Service


 

China moves to lower polyethylene, polypropylene tariff barriers

February 18, 2020


China’s finance ministry announced today that Chinese importers will soon be able to apply for tariff waivers on a list of 696 US and Canadian goods, including plastics such as linear low density polyethylene (LLDPE), high density polyethylene (HDPE) and polypropylene (PP).

While not a blanket lifting of the duties imposed in retaliation for US tariffs on Chinese goods, the tariff exemption applications could benefit North American PE producers, who are counting on emerging markets such as China to absorb much of the new capacity that was built in recent years.

Starting March 2, importers can apply to import specific amounts of items from the waivers list. Upon approval, importers would pay the baseline 6.5% duty for a year, without the additional tariffs imposed as part of the trade war. The tariff exemptions would only apply to approved volumes for a period of one year.

Westlake CEO Albert Chao made note of the tariff waivers during an earnings-related call Tuesday morning, but said it was unclear what demand there would be.

PE traders did not expect much near-term impact. The COVID-19 coronavirus epidemic has brought a dramatic slowdown in China's manufacturing activity and logistics, and domestic producers' polyolefins inventories are at record highs.

Chinese resin buyers will not be back in the international market for big volumes before April or May, one PE trader predicted.

US HDPE blow mold pricing has been steady at 32 cents/lb railcar FOB Houston for more than a month, after recovering from the high 20s cents/lb in late 2019.

--Reporting by David Barry, David@petrochemwire.com;

--Editing by Joe Link, Joe@petrochemwire.com

Copyright, Oil Price Information Service


Celanese Singapore Fire Adds Pressure to Global VAM Market

February 14, 2020

Vinyl acetate monomer (VAM) prices are rising partly as a result of a fire that broke out at U.S. producer Celanese’s Singapore plant on Feb. 7.

Other products produced at the complex, including acetic acid, butyl and ethyl acetate, are holding steady at this time, according to industry analysts.

“Spot VAM prices in Southeast Asia and elsewhere in Asia have risen as a result of the outage, but also as a result of VAM units in China having to decrease operating rates due to logistics restrictions caused by the coronavirus,” said Mike Nash, IHS Markit’s Vice President of Syngas Chemicals.    

Acetic acid, produced primarily by the carbonylation of methanol, is used in the production of PTA, a feedstock for polyester fibre and PET bottle chips. China accounts for 54% of world acetic acid capacity, according to IHS Markit.

Spot acetic acid prices fell this week despite the outage, partly based on the anticipation that the Singapore facility may restart shortly, Nash added.

At its Jurong Island, Singapore petrochemical facility, Celanese operates a 600,000 mt/year acetic acid unit, a 210,000 mt/year VAM unit as well as ethyl and butyl acetate units.

In a statement received by OPIS, Celanese confirmed the fatalities of two people, including a Celanese employee, as a result of the injuries from the incident.

“It is with deep regret and sadness that we share news of the fatalities of two people, including a Celanese employee, from our site in Singapore,” Travis Jacobsen, Celanese’s Director of Global Corporate Communications, said in an email to OPIS.

“Both suffered injuries in an accident that occurred on Feb. 7 while they were performing turnaround preparation work at the site,” Jacobsen said.

Singapore newspaper Straits Times reported that the dead were among a group of workers who were carrying out purging of a hydrocarbon pipeline when a fire broke out.

An investigation has been initiated with support from Celanese experts. The Singapore authorities have been on site and will be conducting a parallel, independent investigation.

“The site is secure, and at this time there are no additional safety concerns related to this incident or the operations of the site,” Jacobsen added.

The fire affected Celanese’s VAM unit and will potentially impact the availability and prices of VAM, buyers in Asia said, who have not been notified of any impending acetic acid or ethyl and butyl acetate supply cuts or shipment delays.

“Due to this incident, we are experiencing minor operational delays for customer shipments. We expect additional information from local authorities during the week of Feb. 15 which will help us determine any additional delays,” Jacobsen said. “We will work with our contract customers to source within our supply network to ensure there is minimal disruption to order delivery.”

The markets in South and Southeast Asia were relatively quiet in late January/early February due to the combination of the Lunar New Year holiday and the Covid-19 coronavirus outbreak, William Bann, Business Manager for Acetyls and Methanol for Technon OrbiChem told OPIS.

“Downstream customers covered requirements for the first half of February prior to the holiday period, so prices were stable during the extended holiday break.  There was not an immediate reaction in the markets, but I would expect to see spot prices for both acetic acid and VAM increase if downstream demand picks up to any extent or if Celanese is forced to halt production in Singapore while officials investigate the incident,” Bann said.

Regional shipments were not immediately expected to be impacted for some of the products produced at the complex as demand has been muted amid the virus outbreak.

“Their local representative has just confirmed that they can supply additional volumes of ethyl acetate for March loading,” a southeast Asian petrochemical importer said, who added that its shipments of the same products from China have been delayed by three weeks due to local transportation lockdowns amid the country’s wide-ranging Covid-19 coronavirus containment measures.

“Normally, we would expect the market to be strengthening as demand returns after the Lunar New Year holiday. This year, however, the coronavirus has led to weaker market sentiment, with end-users reluctant to purchase more than their immediate needs,” Nash said. “Some derivative units remain shut down from before the Lunar New Year holiday. Therefore, the impact of the Singapore outage has been less than it would have been in a seasonally typical market.”

Acetic acid buyers in India, the world’s biggest importer of the chemical, have not been notified of any disruption to supply from Celanese’s Singapore facility. Buyers on the west coast receive around 20,000-22,000 mt a month from the plant, said an Indian ethyl acetate producer.

“My understanding is that Celanese has a surplus of acetic acid because the fire broke out at the (downstream) VAM unit, which is likely to tighten VAM supply to India but will also result in an acetic acid supply overhang,” said an Indian buyer.

“China will be a bigger problem than Celanese, no vessels have loaded from China for the past 20 days,” said a separate Indian acetic acid buyer, referring to the domestic transportation shutdowns that have prevented Chinese producers from delivering product from their plants to shore tanks.

As much as 50% of India’s acetic acid imports come from China, the second acetic acid buyer added.

Nor have Indian acetic acid importers seen any increase in current or near-term prices.

“Acetic acid prices have been falling, methanol prices have crashed, PTA prices have crashed,” said the first buyer.

“If the units remain offline for an extended period, the impact could be greater depending on the progress of the coronavirus and on whether that coincides with other planned or planned outages,” Nash said. “In a steady state, there should be sufficient acetic acid and VAM to meet regional and global demand.”

A lengthy outage could be problematic for Celanese supplies globally as they only recently resumed full operations at Clear Lake, Texas, following a fire at that facility in the third quarter of 2019. The Texas unit produces 1.5 million mt/year of acetic acid and 460,000 mt/year of VAM, according to Technon Orbichem.

“Coincidentally, the Singapore plant was shut for planned maintenance at the same time, leaving Celanese very tight in its global network,” Bann said. “Celanese was able to move material out of China to cover some requirements in other regions, and re-directed some acetic acid meant for internal use to external contract customers. 

“It is understood they purchased large volumes of acetic acid in Q3/Q4 and/or swapped with other producers as well.  Celanese managed to keep its customers supplied and did not declare force majeure, which was quite an achievement,” Bann added.

However, with logistics and transportation disruptions ongoing due to the Covid-19 coronavirus outbreak, it is not clear whether Celanese will be able to load large cargoes from its 1.2 million mt/year Nanjing, China plant in the near-term. 

“Other producers in China could face the same limitations, and that would put further pressure on supplies in the region,” Bann said. “Added to the equation is the fact that Celanese has a long turnaround scheduled to begin in early second quarter at its Clear Lake facility, and it will need to start building inventories ahead of that shutdown.”

India is the largest net importer of acetic acid, and two of its main suppliers are China and Singapore.

“There is some flexibility for producers in the Middle East and Asia to offer additional cargoes to India, but I would expect to see higher offers in the Indian markets for March deliveries,” Bann said.

--Reporting by Trisha Huang Trisha.Huang@ihsmarkit.com, Heather Doyle Heather@petrochemwire.com;

--Editing by Joe Link Joe@petrochemwire.com

Copyright, Oil Price Information Service


U.S. polyethylene export growth surged in 2019

February 5, 2020

US polyethylene (PE) exports were up 11% in December to 858,634 mt, a new monthly high, according to Commerce Department data released today. For all of 2019, US PE exports totaled 9.33 million mt, 2.84 million mt (44%) higher than 2018.

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The export boom is a result of the dramatic expansion of North American PE capacity in recent years and the abundance of low-cost feedstock that has made PE exports competitive in the global market.

US PE export volumes to China fell by 9% to 584,157 mt in 2019, bucking the overall trend because of the trade war. However, US suppliers adjusted by selling more into Southeast Asia markets. Of the four fastest-growing PE export destinations in 2019, three were in Southeast Asia: Singapore, Malaysia and Vietnam, which collectively took in 845,888 mt more PE in 2019 versus 2018.

Belgium was the second fastest-growing PE export market for the US by volume, accounting for about 10% of the additional exports in 2019. Brazil was the fifth fastest-growing destination.

US PE export volumes will likely need to continue growing in 2020, with three new PE plants totaling 1.32 million mt of capacity scheduled to come online over the next few months and limited growth prospects for the domestic market.

Domestic demand weakened in 2019, according to preliminary data published in January by the American Chemistry Council (ACC). US and Canadian producers’ 2019 domestic sales totaled 31.6 billion pounds (14.3 million mt), down from 32.7 billion pounds (14.8 million mt) in 2018.


--Reporting by David Barry, david@petrochemwire.com 

--Editing by Joe Link joe@petrochemwire.com

Copyright, Oil Price Information Service 


 

January U.S. Propylene Contracts Settle at a Rollover While Spot Prices Ease

January 24, 2020

January monthly contract prices for polymer grade propylene (PGP) were settling on January 24 at a rollover from December at 33 cents per pound (an equivalent of 143.6 cents per gallon).

The monthly contract price has been steadily falling since September 2019. The lowest contract price in 2019 was 33 cts/lb, reached in December. Prior to that, monthly contracts were last at 33 cts/lb in June of 2016. 

Monthly contract prices for propylene tend to be slightly higher than spot prices, and this trend continued in January. Spot polymer grade propylene began this month trading in a range of 31-31.5 cts/lb (134.9-137 cts/gal) and hit 28.5 cts/lb (124 cts/gal) on January 23, a low not seen since the end of 2016.

The declines in spot pricing come at a time when supply was largely considered to be balanced. No operating issues have been heard regarding any propylene splitters. Enterprise's propane dehydrogenation unit at Mont Belvieu was flaring after a product gas compressor and ethylene refrigerant compressor shut on Thursday. The unit is one of three in the US and it can produce 1.65 billion lbs/yr of chemical grade or polymer grade propylene.

Polypropylene plant operating rates were in the low 80s percent in late 2019 and demand has not been robust for propylene as a feedstock. However, there are signs of improving demand for polypropylene in early 2020. Falling domestic PP prices have made PP imports less competitive and spurred restocking activity by domestic buyers. The domestic resale spot price for HoPP injection was 44-48 cts/lb railcar delivered on Friday, down 10-11 cts/lb from a year ago.

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--Reporting by Kathy Hall, kathy@petrochemwire.com and David Barry, david@petrochemwire.com
--Editing by Joe Link   Joe@petrochemwire.com

Copyright, Oil Price Information Service


Chemical Groups Praise Senate Approval of New North American Trade Agreement

January 16, 2020

The U.S. chemical industry sees economic benefits in the new trade pact with Mexico and Canada that was approved by the Senate today by an 89-10 vote. The U.S. Mexico-Canada Agreement Implementation Act, or USMCA, now moves to President Trump for his signature.

The North American nations agreed to the deal more than a year ago but concerns about labor and environmental issues held up its approval.

The U.S. remains in a historic expansion with more than $200 billion in chemical manufacturing investments announced over the past decade. Much of that investment is export-oriented, meaning the industry must be able to capitalize on its competitive position and depends on a U.S. trade policy that opens rather than closes doors to new markets.

Mexico and Canada are the two largest trading partners for the U.S. plastics industry.

The USMCA maintains NAFTA's tariff-free status for the supply chains, which was a top priority for chemical industry groups.

There are a few changes, however, from the North American Free Trade Agreement (NAFTA) which took effect in 1994. USMCA has stricter rules for auto part rules of origin and requires at least 40% of the parts for a car to be produced in plants where workers make at least $16 an hour. Other changes include updating digital trade and copyright rules.

“We all win under this new agreement,” American Chemistry Council (ACC) President and CEO Chris Jahn said in a statement. “Our unanimous support for ratifying USMCA is a testimony to the collaborative, highly integrated North American chemical manufacturing sector that is uniquely positioned to continue to grow and create new jobs under the new North American trade pact.

The U.S. chemical sector has capitalized on duty-free trade under NAFTA ever since its inception, more than tripling U.S. chemicals exports to Canada and Mexico – from $13 billion in 1994, to $44 billion in 2018. Chemical exports are projected to grow to $59 billion by 2025, the ACC said.

“For the U.S. in particular, companies eyeing the U.S. shale gas revolution and chemical production boom should soon have even greater confidence to invest, knowing that they will be able to trade freely with our industry’s largest trading partners in Canada and Mexico,” Jahn said.

In 2018, U.S. chemical manufacturers exported $46 billion, or one-third of all U.S. chemicals exports, to Canada and Mexico. Around 44% of U.S. chemicals exported to Canada and Mexico are to related parties, according to the ACC.

Nearly a quarter of all U.S. chemical imports are from Canada and Mexico. 64% of those imports are from related parties, according to council.

“We’re thrilled at the prospect of Canada’s ratification of CUSMA to further minimize barriers to North American chemicals trade,” said Chemistry Industry Association of Canada (CIAC) President and CEO, Bob Masterson. “Eliminating tariffs and other barriers to trade has changed the conditions of doing business across borders in North America and encouraged regional investment and economic integration. Producers have become more efficient and more productive because they can benefit from vertical specialization and economies of scale. Canadian, Mexican, and U.S. goods – including chemicals, and goods that require chemicals as inputs – are competitive in the global marketplace because they are products of integrated North American supply chains,” he said.

Canada traded $65.1 billion in chemical products with the U.S. and Mexico in 2018, according to the ACC.

The region is currently experiencing its own renaissance of petrochemical investment.

Current chemical construction in Canada represents some C$10 billion and includes a polyethylene plant and ethane cracker expansion, as well as two separate polypropylene plant complexes each with its own propane dehydrogenation (PDH) units.

-- Heather Doyle  Heather.Doyle@IHSMarkit.com

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Canada Kuwait Petrochemical awards EPC contract for PDH plant


HOUSTON, January 8, 2020 (PCW)--Canada Kuwait Petrochemical Corporation awarded a lump sum EPC contract for its Alberta propane dehydrogenation (PDH) facility and said that the propylene/polypropylene complex is expected to be placed into commercial service by 2H 2023.

Once operational, its listed capacity will be 550,000 mt/yr of propylene, which will be fed from the PDH unit into the site's PP plant.

Previously, the in-service date was projected as mid-2023.

The contract, which was awarded to Heartland Canada Partners, a joint venture of Fluor and Kiewit, will fix approximately 60% of the cost of the PDH/PP facility so far. The contractor selection for the PP part of the complex is ongoing.

Pembina Pipeline Corporation, which together with Petrochemical Industries Company of Kuwait is developing the PDH/PP complex, has revised its proportionate share of the capital cost of the PDH/PP Facility, including the 100 percent directly-owned supporting facilities, to $2.7 billion. Nearly a year ago, Pembina's share was estimated at $2.5 billion.

The complex will be capable of converting about 23,000 b/d of propane into 550,000 mt/yr of PP.

The final investment decision for the PDH/PP complex was announced in February 2019. The facility will be located adjacent to the Redwater Fractionation Complex, just north of Fort Saskatchewan, Alberta.

– David Barry   david@petrochemwire.com

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