what we are talking about today
Daily Chemical Reaction
With A Little Help From My Friends – A Case For US Propylene Support Near-Term
Several factors are emerging in favor of USGC propylene price support near-term and suggest margin pressure for non-integrated derivative producers, many of whom are seeing depressed demand.
We add to our recent discussions of methanol and polyurethanes markets, and we highlight corporate updates from AkzoNobel and Johnson Matthey.
Other items of note range from energy commentary, to packaging demand in Europe, to US chemical rail traffic reflecting an uptick in volume WoW.
Higher Crude, Asia Outages & Rubber Limits – The Three Amigos Taunting US Production
Asia Butadiene (BD) values reflect a five-year low relative to naphtha and BD derivative values reflect little sign of improvement – Asia ethylene is surging higher and this suggests to us that naphtha cracker operating rate issues beyond planned outages in Asia and Europe have not been resolved.
We add to our commentary on the US polyethylene (PE) market yesterday and discuss the spike higher in China acetone prices.
Other items of note today range from oil-and-gas commentary, to rising PET prices in China, to a 2020-22 period targeting self-sufficiency (vs. trade).
US Polyethylene (PE) Gets Some Help; Methanol Finds A Friend (MTO)
US polyethylene (PE) producer nominated contract price uptick for June gains support based on spot and export price trends and higher net costs. We still see margin risk in 2H20 as producers react to positive margins.
We revisit global methanol following an ~18% drop in US methanol values WoW, a notable rise in implied MTO profit and US export market support.
Other items of note today range from oil-and-gas commentary, to USGC ethylene exports to Asia, to multiple downstream restructuring reports.
what we are saying about tomorrow
C-MACC Scenarios & Persepctives
May Price Forecast Update
We are surprised by the strength of ethylene in Asia, as well as some other Chemical prices, and question whether China is building inventory, or more likely simply has too much ethylene capacity off-line for maintenance. If it was an inventory build, polyethylene prices would likely be strong also but they are not.
While naphtha values have risen relative to crude from the extreme lows of April, the discount remains significant versus history and we still hold the view that as long as jet fuel demand remains depressed and gasoline does not bounce fully back to 2019 levels – naphtha will remain cheap.
The rise is US ethane prices is consistent with more ethylene capacity and declining Permian output, but we would expect ethylene cutbacks to offset this in the near-term – the step change in ethane prices required to attract more volume from the Marcellus would make the US very uncompetitive.