September polyethylene contract discussions are expected to be finalized this week. Trade participants have been at odds regarding which direction domestic contract prices will settle. Producers have 3 cent/lb price increases on the table, but some consumers said an increase was unlikely due to ample supply and weak demand. Despite ongoing planned turnarounds with Braskem and LyondellBasell, US polypropylene market participants expect spot prices to remain level as there is ample inventory to cover the production slowdown, estimated by some sources to cover as much as 15% of the market.
Brazilian polyethylene and polypropylene markets are expected to feel pressure from international prices after a couple of weeks of instability in the oil and petrochemical markets due to the attacks on Saudi oil complexes. Over the past week, PE prices were unchanged amid the market instability, while PP prices were seen slightly higher. Currency exchange is starting the week with less volatility at Real 4.16/$1 compared to Real 4.17/$1 a week ago, putting less pressure on domestic prices and opening room for increases in the local market. On the west coast of South America, spot import polyethylene prices were mostly stable last week after the global instability in the oil and petrochemical markets due to the attacks on Saudi oil complexes, while polypropylene prices saw more volatility with some traders reporting seeing higher prices in the region. Most PE prices continue to be around the lowest level since S&P Global Platts began assessing the WCSA PE and PP market in June 2010. As most polyethylene products come from the US, prices may not be much affected, while polypropylene imports in the region come from the Middle East and Asia and could see instability during the week.
US export polyvinyl chloride prices could decline for October as producers conclude pricing negotiations this week. Offer levels were heard last week at $755/mt FAS Houston, a rollover of September levels, but market sources said prices need to be substantially lower to generate buying interest. Multiple sources said FAS pricing will need to be in the $720-$725/mt range to generate deals, given continued sluggish global demand. However, producers are expected to strongly resist reducing the price given the domestic market's consideration of a pending 3 cents/lb price increase for US material in October. The ongoing pricing talks are expected to wrap up by the week's end. Upstream, ethylene dichloride prices are expected to remain in the low $200s range amid an ongoing turnaround at Olin's 748,000 mt/year EDC plant in Freeport, Texas.
US benzene prices are expected to remain under pressure amid softer derivative demand as downstream styrene pricing was weak. Domestic benzene output remained curtailed as toluene conversion margins remained negative. Prompt spot toluene prices have continued to rise on the back of tight supply, and remained at a premium to both benzene and mixed xylenes. STDP margin finished Friday at minus $53/mt. Conversion margins remain under pressure from continued softness in the paraxylene segment amid length globally, and there is little expectation that this will change considering the pending startup of Hengyi's new capacities in Brunei. The softness in paraxylene narrowed the spread between PX-MX to near $37/mt, disincentivizing PX production. Declines in spot benzene prices also weighed on margins amid softer derivative demand. Prompt spot styrene prices in the US finished the week at $905/mt FOB USG amid outages in both Europe and North America. Styrene is expected to remain soft heading into October as producer maintenance concludes.
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