US August ethylene contract settles higher

Spanish Market: Petrochemicals
04/09/24

The US August ethylene contract price settled at 33¢/lb, the highest recorded settlement since November 2022.

The contract price rose by 0.75¢/lb from the prior month, or 2.33pc, which marks a fifth consecutive monthly increase.

An uptick in the contract price was supported by higher US spot ethylene prices. Maintenance at Enterprise Products Partners' (EPC) cavern in Mont Belvieu, Texas, coupled with lower inventories in the second quarter, placed upward pressure on spot prices this summer.

US spot EPC ethylene averaged higher month-over-month. The August spot average for front-month ethylene increased to 30¢/lb from 26.59¢/lb in July. On 3 September, Argus assessed US spot EPC ethylene at 30.31¢/lb.

The US ethylene contract price is a 50/50 formula accounting for ethylene spot prices and ethane feedstock costs. The average of spot ethane prices was lower in August at 13.95¢/USG, down from 15.43¢/USG in July. Prompt month EPC ethane traded higher in September alongside natural gas.

By Joshua Himelfarb

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30/12/24

Viewpoint: European BD to face tighter supply in 2025

Houston, 30 December (Argus) — European butadiene (BD) supply is expected to tighten next year, according to market participants, because of scheduled steam-cracker closures and steady demand. European domestic demand this year helped spot prices maintain a 5-7pc premium to the monthly contract price (MCP) until December, when spot prices fell to parity with the MCP. But the lower BD MCP in December protected Europe's position as the lowest cost region after three consecutive price rollovers, even as US and Asian prices fell. Market sentiment is cautiously optimistic on consumer demand for early 2025. One producer noted that interest for spot volumes remains strong into early next year and export sales should remain resilient, especially once buying interest picks up after the Lunar New Year. European BD exports — which primarily flow to the Asia-Pacific region with one-offs to the US— were stable at nearly one shipment per month from April-December, although they were down from the prior year. Europe's BD exports totaled about 109,700 metric tonnes (t) so far this year, but there are ongoing discussions for one additional long-haul shipment loading in late December. That said, the spread between Europe and the US is forecast to remain closer to parity, narrowing the premium European sellers have obtained from moving shipments eastward. Both planned and unplanned cracker turnarounds in the US may raise prices there and open space for Europe's coastal producers to periodically capture preferred access to Asian buyers, independent of logistical bottlenecks. Currency, crackers may pressure demand Currency fluctuations may dent buyers' confidence in the coming year as a stronger US dollar lifts costs for imports, affecting selling prices of European-origin exports in dollar terms. The outcome of the US presidential election rallied the dollar against the euro and other currencies, as markets price in expected tariffs from the new US administration. The comparative strength of the US economy also drove the rally. Strong European domestic demand could undercut potential BD exports as the region's supplies gradually transition from net-long to more balanced, with ongoing structural changes transforming Europe's chemical business. The closure this year of two steam crackers in France and the Netherlands along with the planned shut down of two more crackers in Italy will reduce regional supply of crude C4, a key BD feedstock. Buyers in Italy will need to rely more heavily on Mediterranean imports of crude C4 in tandem with BD to maintain derivative operations. Cracker operators next year are likely to keep throughput curbed while running lighter feedslates, limiting availability of additional volumes of crude C4 and BD. Rail logistical constraints will linger into 2025 with at least three BD consumers depending more on this mode of transportation. The European market could see additional restructuring next year, with at least one producer weighing a review of its asset portfolio. Market participants also are watchful for announcements of unexpected closures. BD producers in the region are also concerned about price volatility for natural gas, citing weaker margins. Dutch TTF on a day-ahead basis averaged €44.66/MWh month-to-date in December, rising by 27pc from the same period a year earlier at €35.24/MWh. Dutch TTF on a day-ahead basis reached a year-to-date peak on 21 November at €48.58/MWh. Higher natural gas prices are partially due to continued complications in gas transport and supply and to accelerated storage withdrawals. By Joshua Himelfarb Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Braskem eyes Brazil rebound

30/12/24

Viewpoint: Braskem eyes Brazil rebound

Sao Paulo, 30 December (Argus) — Major petrochemical producer Braskem aims to recover market share in Brazil in 2025, aided by higher tariffs and new duties on imports, after nearly two years of losses. Braskem posted $935mn of losses last year, with additional losses of $440mn spread across the first three quarters of 2024. Looking ahead to 2025, Braskem expects to increase its domestic share of polyethylene (PE) and polypropylene (PP) markets in Brazil, in part through higher import tariffs. Brazil raised tariffs on imported polymers to 20pc from 12.6pc effective on 15 October. That has already benefited the company, with sales in the fourth quarter expected to increase by $30mn from the previous quarter, Braskem said in November. Additionally, with fewer imports, Braskem's operating rates for plastic resins are expected to rise in the first quarter from around 64pc during the seasonally weak fourth quarter. In addition to the higher tariffs, Braskem is asking Brazil to apply anti-dumping duties on US- and Canada-produced PE. This could reduce the amount of this material coming into Brazil, which has surged in recent years. The case is being investigated. Braskem has requested duties on PE imports of 21.4pc from the US and 26.9pc from Canada. This would mean a 20pc import tax, plus a 21.4pc provisional dumping duty, totaling a 41.4pc tax on materials purchased from the US, and 46.9pc on Canadian PE. To put the numbers in perspective, Brazil imported 1.82mn metric tonnes (t) of PE in January-November, a 45pc increase from the same period a year before. Of the total figure, 77pc was bought from the US and Canada. Brazil's PE imports in November alone fell to 106,200t, 39pc lower than October and the lowest this year, showing the initial impact of the higher import duties. Still, November PE imports were up by 6pc from the same month in 2023 despite the 20pc import duty as well as the US dollar's appreciation to the Brazilian real since October. The Argentina case Braskem has looked to neighboring Argentina to recapture part of the sales lost to imports in Brazil during the year. Braskem's PE sales to Argentina have increased monthly through October, when the company became the largest PE exporter to Argentina. Argentina PE imports in October increased by 39pc from the same month in 2023, reaching 24,300t, a boost attributed to the reduction in the country's import duty to 7.5pc from 12.6pc in September. Brazil sold 46pc of that total, leading the market. North America lost its first position, falling to 42pc in October from 54pc a year earlier. January-October PE imports into Argentina fell to 226,800t, down by 19pc from the same period in 2023, with North America's share at 44pc and South America — represented solely by Braskem — at 39pc. Executive reshuffle As part of its efforts to become more competitive, Braskem reshuffled its executive board, aiming to improve operational efficiency and cost management. The company's new chief executive, Roberto Ramos, stepped into his role in early December, succeeding Roberto Bischoff. Ramos previously served as Braskem's vice president from 2002-2010. Ramos almost immediately announced changes for the positions of chief financial officer, head of the olefins and polyolefins South America unit, Brazil and global industrial operations, and Mexico and US operations. At the time, Braskem said that changes in the board would not affect plans for a possible sale of infrastructure company Novonor's controlling share in Braskem, Novonor said. Braskem's sale is of extreme importance to Novonor as it plans to use any proceeds to repay R14bn ($2.34bn) in debt to creditors. Braskem is the largest producer of thermoplastic resins in the Americas and a leader in biopolymer production. Fellow conglomerate Novonor holds a 38.3pc stake in Braskem with 50.1pc of voting shares, while Brazilian state-controlled oil company Petrobras holds a 36.1pc share with 47pc of voting capital. The remaining 25.6pc is split among other shareholders. By Fred Fernandes Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: rPET demand robust but challenges persist

30/12/24

Viewpoint: rPET demand robust but challenges persist

London, 30 December (Argus) — Europe's plastics recycling market will be supported by legislation and voluntary recycled content commitment goals in 2025. But lower costs for virgin polyethylene terephthalate (PET) resin and competitive imports will likely weigh on the sector. Recycled PET (rPET) is a plastic made from recycled bottles, containers and PET waste, and is the material most commonly used by packaging manufacturers to help meet their sustainability goals. New EU legislation should provide a stable level of demand for the recycling industry in 2025, with the Single Use Plastics Directive (SUPD) coming into effect on 1 January. The directive mandates collection and recycling targets for all member states, requiring PET beverage bottles to have a minimum recycled content of 25pc. But there are some uncertainties that undermine the security the legalisation was intended to provide. The SUPD mandates recycled goals at member state level, and so the responsibility to purchase and use rPET at a premium to virgin PET resin has not yet been passed down to individual companies. Some pushback from market participants in the value chain, which will bear the burden of the premium cost for recycled content, is anticipated. Another issue is that the penalties for member states not meeting the set targets have yet to be communicated. The impact of the SUPD will not be fully felt in Europe's rPET market until the consequences for not reaching goals are clarified and systems such as extended producer responsibility schemes are implemented to ensure equal compliance. This is unlikely to be before the second half of 2026 at the earliest. Although many large companies and fast-moving consumer goods (FMCG) brands have already set voluntarily recycled content targets for beverage bottles that go above and beyond the SUPD requirements, the recycling market is under pressure from wider economic concerns. A recovery in consumer packaging demand in 2024 has not been enough to prevent some brands from switching to lower-cost virgin PET resin, a dynamic that is expected to continue throughout 2025. Meanwhile, some brands have omitted 2025 targets from their sustainability reports and have scaled back their ambitions. . Availability of high-quality PET bale, likely to be used in food grade applications, has tightened towards the end of 2024 and could tighten further at the beginning of the new year, supporting prices in the first quarter when collection volumes are seasonally at their lowest. Demand from preform and packaging manufactures should return for the peak season of packaging consumption from March onwards, but market participants expect it to be lower than originally projected for 2025. Recyclers are well stocked and, in some cases, oversupplied with flake and food grade pellet volumes as a result of low demand throughout 2024. There is likely to be some pressure on flake and food grade prices in the first quarter and margins for recyclers may continue to be slim. Converters and packaging companies closely monitored inventory levels throughout 2024, purchasing on a hand-to-mouth basis. If end use consumer demand is stronger than expected over the peak summer season, flake and food grade prices may find support as market participants restock, allowing recyclers to regain some margin. But European recyclers continue to be concerned about competitive imports, with many calling for a level playing field . Market participants are worried that if demand picks up and the market begins to tighten, imports offered at significant discounts to European material will undercut recyclers and again weigh on European prices and recycler margins. Although the outlook for 2025 is uncertain for recyclers, there is some quiet optimism. It will be a year of transition and adjustment as the market adapts to the legislative changes and tries to mitigate the challenges endured over the past few years. By Chloe Kinner Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: Consolidation looms in US methanol

27/12/24

Viewpoint: Consolidation looms in US methanol

Houston, 27 December (Argus) — The sale of Netherlands-based OCI's methanol production assets to rival producer Methanex is set to shift the market, with US methanol production most affected by the move. Methanex in the third quarter of 2024 announced the $2bn acquisition, which is expected to close in the first half of 2025. The boards of directors of both companies and OCI's shareholders approved the transaction, but it is subject to regulatory approvals. OCI operates the 1mn t/yr OCI Beaumont plant and is a 50:50 partner in Natgasoline, a 1.7mn t/yr joint-venture plant between OCI and Proman. Methanex operates three plants in the US, all in Geismar, Louisiana. These plants carry a collective 4mn t/yr capacity and represent one-third of total US methanol capacity. At front and center of the acquisition is the Natgasoline plant in Beaumont. Natgasoline, when operational, represents 14pc of domestic production. The plant opened in 2018, and throughout those six years, the plant has seen its share of operational issues. The most recent was a fire at the reformer unit in early October, resulting in a complete shutdown lasting nearly three months. When the deal was announced, Methanex made it clear that the transaction was subject to approvals by OCI shareholders, as well as a pending legal decision between OCI and Proman. "If it is not settled within a certain period, Methanex has the option to carve out the purchase of the Natgasoline joint venture and close only on the remainder of the transaction," the company said in September. Methanex and OCI declined to give further details, as the deal is still pending. Proman did not respond to a request for comment. If it goes through, the acquisition would result in the exodus of OCI from the US methanol market. But the issue of liquidity in the US spot barge market is also looming. Market participants said OCI is a frequent buyer when the Natgasoline plant goes down. In October, when Natgasoline was completely shut down, 340,000 bl of methanol moved for delivery at ITC, the terminal on the Houston Ship Channel where methanol is exchanged, according to Argus data. Market participants expect liquidity to be about the same until some time after the deal closes. When a plant goes down, a producer will emerge in the spot market for purchases. In the longer term, there are some questions around international distribution and where US methanol exports find a home. Methanex is a major exporter to Asia, whereas OCI sells into the European market. The low-carbon methanol sector will also experience some shakeup. OCI is a major participant in the bio-methanol space, selling volume into Europe. Methanex produces carbon-captured methanol, also known as blue methanol, which has not penetrated the EU market. By Steven McGinn Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Viewpoint: PVC expansions loom over US market in 2025

27/12/24

Viewpoint: PVC expansions loom over US market in 2025

Houston, 27 December (Argus) — US polyvinyl chloride (PVC) market participants expect some domestic demand growth in 2025, but recent expansions could limit price increases in both the domestic and export markets. Most producers are optimistic PVC demand will grow at a strong rate in 2025, with some expecting growth above 5pc. But producers also caution that greater volume sales may not translate into higher prices because of additional capacity brought on line in the second half of 2024. Formosa added 130,000 metric tonnes (t) of PVC capacity to its Baton Rouge, Louisiana, plant in the third quarter, and Shintech added 380,000t/yr of PVC capacity to its Plaquemine, Louisiana, plant in the fourth quarter. Producers' concerns that higher sales volume would not translate into higher prices have proven true so far. Domestic PVC sales have grown as much as 8pc in the year through November, according to producers, but PVC contract prices in November were unchanged from January at 57.5¢/lb after some fluctuations during the year. Prices fell by 2¢/lb in the months following Formosa's expansion. Contracts for December, which will represent the month following Shintech's expansion, have not yet settled. Buyers have more muted expectations than producers for demand in 2025, further adding to the modest price outlook for the coming year. This is partly because many buyers believe interest rates that recently began to fall will take time to stimulate housing construction, potentially delaying a rise in PVC demand until late 2025 or even 2026. Lower interest rates can reduce homebuilders' borrowing costs and ease mortgage rates for prospective homebuyers. The cautious outlook was already pervasive among PVC buyers and converters before the US Federal Reserve in December reduced its forecast for 2025 interest rate cuts to half a percentage point, down from a full point in the September projections. Reliance on exports US producers may need to rely on exports to absorb the new capacity, a trend that has kept export prices low since August. US PVC export spot prices were at $700/t fas on average in late September after Formosa ramped up its capacity expansion, compared to an average of $750/t fas a year earlier. After Shintech's expansion, export prices fell to $673/t fas on average by late-December, compared to $695/t fas on average during the same time in 2023. While spot export prices initially had a floor of $670/t fas after both expansions, the global environment has become even more competitive at year-end with some overseas producers struggling to move volume, according to traders. A greater reliance on exports at a time when several countries recently implemented anti-dumping duties on US material could make for a difficult market in 2025, with pricing needing to come down to start the year if there is too much volume on hand, traders said. India recently announced preliminary anti-dumping duties on US PVC from 80-150pc, with duties exceeding $300/t for some US producers. Brazil in October raised import taxes on PVC from 12.6pc to 20pc. The European Commission last month confirmed duties on US-origin PVC between 58-71.2pc, and the UK is considering duties from 38.4-56pc. The Indian duties in particular could pose a challenge to US exporters because US producers and traders had become reliant on Indian customers as an outlet for US supply. India is one of the few countries for US exports with steady demand growth. Should US exporters lose market share in India, there are no immediate alternatives to offset that loss. By Aaron May Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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