Petrotahlil — The European naphtha market saw increased volatility and slower demand, which put pressure on prices. Demand remains sluggish with petrochemical producers still seeking to maximize propane utilization as a feedstock against naphtha due to more competitive pricing.
The reduction in length noted in the European propylene market in the previous week is expected to continue for the week starting July 20, with improved demand for chemical grade propylene, light cracking and talk of reduced run rates placing pressure on spot prices.
The butadiene market will be looking ahead to the start of contract negotiations, with Butachimie, Europe's largest consumer, approaching the end of its July turnaround. On the export side, the continued rise of Asian price levels amid tight supply should provide some further flexibility for producers and exporters with prices likely to creep up further.
European glycols supply from the Middle East could tighten further as chemicals production competes for more limited ethane production following the implementation of OPEC+ production cuts in July. According to a Saudi Arabian supplier source, polyethylene production was the chief beneficiary of limited ethane feedstock, which saw other segments, such as monoethylene and diethylene glycols lose out. This added to an already tight European monoethylene glycol market as resupply from the US had become more limited since the second quarter as the US focused on resupplying the Asian market.
Contract price negotiations were ongoing for some polypropylene market participants, as ample supply and mixed views on demand have led to some buyers resisting producers' attempts to pass through the increase in feedstock propylene's July contract price settlement. Early July PP contract price settlements have resulted in a range of increases from over 53% of the monomer increase to, in limited cases, 100% of the monomer increase.
In the Turkish polymer markets, all eyes will be on whether activity increases this week after several weeks of limited activity amid raised offers following feedstock price increases. A wide gap between buying and selling ideas has been heard to continue, and with US shipments inbound, particularly of high density polyethylene and linear low density polyethylene, offers may have to be more flexible.
AROMATICS AND METHANOL
Attention in the Europe MTBE market is expected to remain focused on the strength of gasoline relative to naphtha, as the narrow spread between the two prices has pointed to unfavorable blending economics for naphtha. It also reflected an associated reduction in the demand for higher octane components such as MTBE.
Related octane boosting gasoline components, mixed xylenes and toluene, have also fallen to fresh lows, with little in the way of fresh demand side cues for the blending market in Europe.
However, oil and gasoline prices are steadily marching higher, and with mobility trends in Europe pointing to increased driving activity, the market may see more demand over the coming week.
In methanol, following an active week for the spot market and lower global production, supply is expected to balance out. Market participants will keep an eye on developments in the Asian market, as spot prices are slowly recovering from the multi-year lows.
The week starting July 20 should bring more clarity to the virgin and recycled PET markets on August demand. Players across the industry will be hoping for some resemblance of a summer season in August, having already missed out on crucial summer events and mass gatherings.
Customers have been holding off on August volumes until more certainty is realized regarding a return to normal life in August.
R-HDPE recyclers will be hoping for prices to continue firming in the virgin HDPE market this week, closing the gap to recycled HDPE and reigniting interest from buyers.