US propylene trade sources were looking to October propylene contract discussions this week. October PGP contract was offered down 3.25 cents from the September settlement of 39 cents/lb while November was offered at a 3-cent decline. November spot prices head into this week at a 1-cent backwardation with October pricing levels. Meanwhile in US ethylene, trade participants ended last week with spot prices flat at 24 cents/lb with the expectation for stable pricing throughout the coming week.
US polyethylene prices were expected to continue inching down amid robust supply. Industry statistics show September inventories were nearly 7% higher than in September 2018, ahead of a rush to destock before year-end that led to logjams in rail storage-in-transit (SIT) yards and backups at some packaging warehouses at ports in Houston, New Orleans and the US East Coast. Those backups lasted into April this year. Market sources expect similar backups to emerge in the last two months of this year as well with 1.77 million mt/year of new PE capacity slated to start up by the end of December. US polypropylene participants continue discussions of slowly eroding spot prices, with a near consensus on the lack of export opportunities. Market sources expect a decline in the polymer-grade propylene contract for October, with most expecting a drop in the range of 1-3 cents/lb. PP pricing would fall in lockstep with PGP once a settlement is reached.
Brazilian polyethylene and polypropylene markets are expected to be under pressure for lower prices from international suppliers over the week. In the past week, prices fell in both PE and PP following drops in the US and Asia. Currency exchange is starting Monday with strong evaluation week on week at Real 3.98/$1 compared with 4.14/$1 of the past week following the approval of the pension reform. Braskem has not commented on its weekly price policy. On the West Coast of South America, spot import polyethylene prices are expected to continue to be driven by US and Asian prices after a $20/mt average fall last week. Traders expect international prices to continue under pressure for decreases in both PE and PP prices for the region. Most PE prices are at the lowest level since S&P Global Platts began assessing the WCSA PE and PP market in June 2010. The Argentina polyethylene market is expected to see some volatility during the week as the country usually sees more pricing movements in the turnover of each month, summed with the election of Alberto Fernandez (Frente de Todos) as new president of Argentina on Sunday. In the operations side, Dow Argentina is expected to put more material available in the market, which could drive prices down. The Mexican polyethylene market is expected to continue attached to the US markets and USGC prices. Prices were down last week for HDPE and stable for LDPE and LLDPE. The proximity, logistical convenience and trading relation with the US makes pricing connection inevitable, while currency exchange and internal demand are also drivers for consumption.
US polyvinyl chloride producers were expected to begin November pricing talks in earnest this week, having floated possible pricing levels to gauge buyer reaction. Market sources said those levels ranged from $730-$745/mt FAS Houston, nearly even with or slightly below October's range of $740-$750/mt. While producers have said volumes will be less available amid upcoming planned work next month, sources said inventories were healthy and producers would still need to sell into export markets as global demand remains sluggish. Sources said they expected November prices to be about $20/mt lower than October levels, though producers were initially reluctant to retreat that much. Upstream, ethylene dichloride prices were seen holding last week's $15/mt gain in a range of $220-$230/mt FOB USG, with less available supply amid chlor-alkali rates that fell to 84% in September from 92% in August, according to the latest industry statistics.
Benzene prices were poised to remain soft this week ahead of the expected November contract settlement. Market participants anticipated the November contract price could settle in the mid-220s cents/gal range and pointed to a near 40-cent gulf between the October contract at 260 cents/gal and current trading levels. Downstream, sources anticipated that US styrene prices would remain under pressure as Shell's styrene production at Scotsford comes back online. In toluene, prices were expected to continue seeing support from gasoline as chemical demand remains weak. STDP margins were expected to stay in negative territory and run rates were likely to see pressure following the settlement of the November benzene contract, sources said. Mixed xylene prices were not expected to see significant improvement due to length in the paraxylene market and limited growth in the downstream PET segment.
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