Sentiment in European polymer markets is bullish, while prevailing uncertainty due to tropical storm Harvey is expected to keep methanol prices strong.
OLEFINS
European olefins market are likely to strengthen further this week ahead of the maintenance shutdowns across the region. Contract prices for September have now settled at a Eur30/mt increase: at Eur995/mt (about $1,185/mt) for ethylene and Eur830/mt for propylene.
Around 9% of steam cracker capacity is scheduled to be out of the market in September. However, Total has reportedly now delayed its turnaround until next spring.
Demand for olefins remains strong, and with the lack of a workable arbitrage into the region, inventories will remain low at least until the end of the quarter.
As 50% of US cracker capacity remains offline and ports remain shut in the wake of the tropical storm Harvey, there will be additional upward pressure on the European markets.
AROMATICS
Downstream outages will keep the benzene market in Europe long for the foreseeable future, despite the anticipated reduction in pygas output.
The arbitrage to the US stands difficult to work, and this will mean that Europe will struggle to export its length.
In the meantime toluene and mixed xylenes markets are likely to capitalize on the disruptions of refinery operations in the US Gulf. The aftermath of Harvey sent gasoline prices soaring at the end of last week, which could incentivize producers to keep most of the reformate within their own systems. Thus availability will tighten at the time when the arbitrage has to the US has finally opened.
Styrene producers remain the biggest winners. With the joint effect from the domestic outages and delays in resupply from the US, production margins have soared to over two-year highs.
The surge in prices will, however, start undermining the downstream demand.
POLYMERS
The sentiment in the polymer markets is bullish, following increases in olefins prices for September. Production issues on some products will lend support too and resupply options might be limited with the tightness in the US Gulf.
The end of summer holidays is also likely to see a pick up in demand as converters replenish their stocks. PS and ABS converters, in particular, are bracing themselves for three-digit increases in their September contract prices amid sharp rises in feedstock styrene. And PET converters are still finding it hard to come up with molecules as Lotte's force majeure in Wilton, UK, is still in place and production uncertainty remains at the JBF's Geel plant in Belgium.
MTBE, METHANOL
Prevailing uncertainty due to tropical storm Harvey is expected to keep methanol prices strong in Europe this week.
Major producer Methanex increased its September Asia contract price by $30/mt to $350/mt, while the company raised its North American posted CP by 3 cents to 116 cents/gal ($386/mt) FOB USG, setting a bullish tone for European methanol for the beginning of September.
MTBE demand remains supported by higher uptake from Latin America, a large export hub for US product, as US Gulf disruption has meant that buyers of US material would have to source MTBE elsewhere.
SOLVENTS, INTERMEDIATES
Little relief is expected for oxygenated solvents prices due to upcoming planned maintenance, as well as potential disruption arising from the US production and logistical difficulties.
Ineos' turnaround for acetone/phenol is expected to keep the market tight, while BASF's turnaround for butac this month will maintain prices. Inventories were heard to have recovered in the etac market, but stronger feedstock prices are expected to minimize any price reductions.
Not much let-up is expected for MEK and IPA prices either, despite Shell lifting the force majeure on its supplies from Pernis, in the Netherlands, in August, as demand in September is expected to be strong.
Multiple force majeure declarations on VAM supplies in the US Gulf have changed the tide in the European market, where prices have recently been on a downward slide. Molecules are now expected to be scarce in Europe, and traders are already pricing that in.
