FEEDSTOCKS: In feedstocks, naphtha continued its steady rise in line with crude oil last week, and the European gasoline complex was supported by a stronger pull from across the Atlantic, driven by growing seasonal demand and refinery outages in Los Angeles and Texas. A fire at Intercontinental Terminal Company's petrochemical tank farm bolstered European naphtha cracks, while unplanned outages at steam cracking and extraction units capped some of the bullish sentiment. In the week ahead, feed preferences are expected to remain orientated toward maximum LPG cracking in Europe as butane prices in the North fall due to summer gasoline blending constraints and propane struggles to break out of petrochemical pricing territory due to thin inland consumer heating demand. Summer demand for gasoline is still not yet at full speed, meaning that the market is expected to remain long in the weeks ahead, with the bulls looking for stronger blending interest to soak up naphtha volumes.
OLEFINS: The propylene market is expected to remain long with ample product available. Buying appetite for spot material is also set to be limited. Market participants are waiting for the April contract price to settle, with expectations pointing to an increase on higher feedstock costs. In the ethylene market, supply is expected to become tighter for April because of recent unscheduled maintenance. April offers were last heard at a 10% discount to the contract, which was slightly higher than previous indications. The contract for April is expected to settle next week, and indications so far have been for a Eur10-Eur35/mt rise. The market is also awaiting the full settlement of the March monoethylene glycol contract. Indications from the spot market also suggest a rise.
POLYMERS: The polyethylene market will wait for fresh signals from the ethylene contract settlement for direction, although high density polyethylene (injection) was the only PE grade of which supplies were expected to remain tight. Fundamentals in the polypropylene market are expected to remain unchanged, with healthy supply across Europe. The market will be in wait-and-see mode ahead of the April propylene contract price. On the PVC market, participants are awaiting monomer contract prices before discussing major volumes or export cargoes. Additionally, local elections in Turkey and economic uncertainty are keeping export conditions uncertain, and leading European suppliers are looking to domestic markets instead. Contract negotiations for ABS draw to a close this week after market participants faced a month of weak demand. ABS producers have struggled to increase prices in line with increasing feedstock costs for March. Feedstock costs look set to rise in line with increasing demand and market tightness. Lastly, on the polystyrene market, contract negotiations also come to a close this week as sellers seek to retain margins following strong demand in March. Buyers may face supply tightness as sellers closed their order books.
AROMATICS: Traders in the toluene market are still assessing short and long-term implications of the fire in the US impacting storage at the Intercontinental Terminals Company's Deer Park facility in Texas. While the arbitrage window has shown signs of opening last week from Europe to the US, European prices still remain too high in the near term for exports to be immediately profitable. European xylenes traders will also be assessing the impact from the fire at ITC. Different scenarios are expected by traders, ranging from large demand for European mixed xylene from the US market to falling premiums to compete with lower priced supply from South Korea. Similarly, market participants on the European benzene market await whether the fires at ITC and ExxonMobil's 563,000 b/d Baytown refinery in Texas would affect benzene production. Additionally, while the fire at ITC affected tanks containing xylene and toluene, both blendstocks for gasoline, and not benzene itself, the shortage of blendstocks may mean that more feedstock would be channeled toward blending gasoline instead of aromatics production. Lastly, on the styrene market, market participants expected a three-figure increase inthe European April contract price, in line with higher spot prices and feedstock costs.
OTHERS: The caustic soda market expects the second-quarter contract price discussions to begin this week. A wide gap between the European spot and contract prices developed since beginning of the year with significant length in the market exerting downward pressure on Q2 contract prices.
METHANOL/MTBE: Attention on the methanol market will continue to focus on the second-quarter contract price negotiations. Expectations are mixed, with sources pointing to a rollover or a small decrease or increase. Meanwhile, European MTBE demand is expected to remain steady to higher toward April because of bullish Eurobob gasoline. With only a week to go, April's EBOB switch from winter to summer grade is causing a seasonal uptrend in the MTBE factor, the relationship between MTBE and Eurobob.