Market Update
Plastics Feedstocks (Oil, Naphtha, Propane)
- Over the past two weeks, WTI Crude Oil is down 1 % to a spot price of $81.98/barrel, Naphtha (Japan) is down about 2% to a spot price of $700/mt, and Propane (Mont Belvieu) is down about 6% to a spot price of 78 cents per gallon. WTI crude oil prices have been consistent between $75-$85/barrel for the first half of 2024.
Propylene/Polypropylene
- The physical PGP prices continue to increase as supply tightness remains the dominant market force. Physical PGP prices are up 3% the past two weeks to a spot price of 52.5cpp from 51cpp two weeks ago.
- When Hurricane Beryl’s path shifted from the eastern coast of Mexico towards the greater Houston area, the storm had a direct impact on US Gulf Coast petrochemical production. There were someissues (mostly minor) at three PDH units (Dow, Invista, and Enterprise PDH 1) and some PP producers had to shut down or run at reduced rates (Braskem, LYB). What was an already snug PGP market became even tighter after Beryl’s impact. According to ICIS data Hurricane Beryl impacted approx. 6.6 bil pounds of PGP and 2.2 bil pounds of PP capacity.
- BlueClover’s view that PGP prices would dip into the low 40s this summer was proving wrong before Beryl and our odds of success have plummeted. This sustained rally in PGP pricing is forcing BlueClover to revise our near term estimate higher for PGP prices but we still do expect contract PGP to reach into that 42-44cpp price level later in the year.
- Our most recent estimate was that contract PGP would average between 42 and 44cpp for the combined July-August average. However, our current forecast for July contract PGP is 54cpp which would be an increase of 6cpp from June. There would need to be an absolute freefall in PGP pricing in August to come close to our prior estimate of 42-44cpp for the July-August average. BlueClover is estimating August contract PGP pricing at 52cpp which would put the July-August average at 53cpp. If this were to materialize it would be 10cpp higher than what our guess was a month ago. Clearly we were wrong.
- BlueClover is anticipating contract PGP prices to average 46cpp in the Sep-Dec timeframe with one or two months in that stretch seeing contract PGP pricing at or lower than 44cpp. We continue to hold our view that the contract PGP low price has yet to be set for the 2024 calendar year; we just had to push the timeline out. This view continues to run counter to most industry analysts who feel the contract PGP low price for 2024 was set in May at 46cpp.
- For right now the hurricane picture is quiet but many weather pundits continue to call for an active hurricane season.
- PP imports jumped higher in June as a result of freight rates increasing out of China. China freight rates have more than doubled since mid April. This gave the US market a chance to sell PP into regions like Latin America which created more demand for PP in May and June. The freight rates remain elevated but PP prices in China are dropping which will hurt the ability of the US PP market to export especially since US PP prices are increasing. See Trader Toolbox on page 5 for how much China impacts the global PP market.
- Several PP producers have sent out margin increases calling for a 3cpp increase between the contract PGP and contract PP price starting in July.
- Overall PP prices have been increasing with monomer. Physical PGP prices are up 10cpp from their 2024 low point in early May and widespec PP prices are up about 6-8cpp over the same time period. Widespec PP product is relatively tight out there with widespec Copolymer PP being extremely tight.