Ethylene remains long although the market has edged towards increased balance, since the spate of exports in April saw product leave Europe.
OLEFINS
The recent spike in naphtha prices on the back of an overall rising crude oil complex has added a bullish dimension to the rest of the month. As for propylene, there are signs of tightness persisting in the spot market amid upcoming planned turnarounds in Europe, light cracking and robust derivatives offtake.
The European butadiene market remains tight, with demand from the US continuing to attract the attention of sellers and lighter cracking reducing availability of upstream crude C4. This lower availability is continuing to limit the capacity of some European producers to respond to strong demand for butadiene, and is already affecting products such as styrene butadiene rubber.
POLYMERS
Polyethylene is expected to be supported for the rest of May, following the increase in the contract price of feedstock ethylene. Sellers are also anticipating a seasonal demand increase, with higher demand from end-users such as beverage producers.
Demand has yet to rise substantially, however, with market participants in wait-and-see mode and Europe well supplied for the time being. After a quiet start to the month, buying activity in downstream polypropylene is set to increase as most participants expect propylene prices to rise.
The increased share of ethane as a feedstock to European crackers has started to feed downstream, with polypropylene emerging as an overall tighter market than polyethylene. PVC producers face a tough battle in Europe as producers try to increase pricing based on a Eur20/mt increase in ethylene feedstock.
Buyers rejected similar attempts in March and April due to wide production margins. The Turkish market remains soft and is liable to weaken further with an economic downturn expected, affecting demand from the construction industry.
AROMATICS
The European styrene market is expected to find more balance amid a boost in US import supplies against good demand. Downstream polystyrene demand is expected to remain strong through May and June after a lackluster April.
May and June also typically see high demand, especially for expandable polystyrene. Styrene feedstock benzene has remained in the doldrums for most of the year, as spot prices have not tracked the increase in the oil complex.
Inventories in Europe have been reported as high, but downstream offtake has been heard strong for a few weeks now as most downstream turnarounds have ended. Benzene traders remain in a wait-and-see mode, as end users work their way through a well supplied prompt market.
Toluene fundamentals remain supported by export interest to the US, while a strong energy complex has pushed spot prices above the May contract price of $800/mt.
Meanwhile, market participants await news on the second settlement of the May PX European contract price. Octane demand in the US is the glimmer of hope for European MX for the short term.
MTBE/METHANOL
MTBE faces more weakness in the short term as supply in Europe remains long and seasonal demand has yet to be triggered by the summer driving season. Reformate pricing also remains competitive, adding pressure as an alternate high octane blend components.
The European methanol market continues to see signs of tightness, with trade flows, particularly in southern Europe, affected by turnarounds in the Middle East. Demand in Europe is relatively stable.
