USGC per unit methanol margins have faced downward pressure since March – we see more downward pressure ahead and present our argument. Other commodity items discussed today include US polyethylene contract nominations for June and a sizable USGC 2H20 polypropylene addition. Other items of note today range from oil-and-gas commentary, to multiple supply chain items worth note, to China demand lagging expectations.
Asia polymer price trends on average do not support the industry case that recent upticks in ethylene and propylene are demand driven, per our model. We take a positive view of PVC relative to other polymer chains (notably PE & PP), find Asia propylene values decline WoW from an 11-week high amid greater supply, and note VAM as another ethylene derivative chain unable to push through higher raw material costs due to lackluster demand. Other items of note today range from oil-and-gas commentary, to Dow comments on the PE markets and the need for clarity on US/China trade to invest in megaprojects, to Nissan motor estimated vehicle production cuts.
Asia ethylene and propylene continue to find support and reflect strength on a relative basis to USGC markets – a near-term plus for US exporters but something to approach with caution ahead of a likely 2H20 supply response. We highlight takeaways from the latest Daicel financial results posting for acetate tow and from the latest Toray report for base chemicals & composites. Other items of note today range from oil-and-gas commentary, the support in US polyethylene order books, and highlight US chemical rail car loadings.
Could our 2019 peak oil thesis – now also raised by BP CEO Bernard Looney – be correct. If so, there is no return to normal for commodity chemicals. We look back at the template that we created at the end of February with our second Scenarios piece and attempt to pull forward some of the conclusions from that report – the most important of which are likely a flatter cost curve for longer and a major step change in consolidation (but not yet).