September prices of European PVC dropped for CIS markets

MOSOCW (MRC) - Negotiations on European polyvinyl chloride (PVC) prices for September delivery to the CIS markets have begun this week. Raw materials in Europe fell in price, and many local producers reduced PVC export prices proportionally, according to the ICIS-MRC Price Report.

The September contract price of ethylene was agreed down by EUR40/tonne from August, which theoretically should lead to a decrease of EUR20/tonne in PVC production costs. Because of a significant reduction in the cost of the main raw material - ethylene, many European producers intend to cut their export prices for PVC for supplies to the markets of the CIS countries in September, but there are producers who do not plan to adjust their export prices.

The demand for PVC from a number of consumers in the CIS countries is not high in September, many consumers reduce their purchases because they expect further price drop in the coming months. But due to technical problems, some plants have temporary restrictions in export supplies.

Several producers were considering reducing export prices by EUR20-30/tonne compared to August. One of the producers does not plan any price cuts this year.

But in general, deals for September shipments of suspension PVC (SPVC) to the CIS markets were held in the range of EUR710-765/tonne FCA.

Trinseo raises September PS prices in Europe

MOSCOW (MRC) -- Trinseo, a global materials company and manufacturer of plastics, latex binders and synthetic rubber, and its affiliate companies in Europe has announced a price increase for all polystyrene (PS) grades in Europe, as per the company's press release.

Effective September 1, 2019, or as existing contract terms allow, the contract and spot prices for the products listed below increased as follows:

- STYRON general purpose polystyrene grades (GPPS) - by EUR100 per metric ton;
- STYRON and STYRON A-Tech high impact polystyrene grades (HIPS) - by EUR100 per metric ton.

As MRC informed before, Trinseo last raised its prices for all PS grades on 1 Jue 2018, as stated below:

- STYRON GPPS grades - by EUR50 per metric ton;
- STYRON and STYRON A-Tech HIPS grades - by EUR50 per metric ton.

According to ICIS-MRC Price report, market participants said Nizhnekamskneftekhim would raise its selling HIPS and GPPS prices by Rb2,000/tonne in September.

Trinseo is a global materials company and manufacturer of plastics, latex and rubber. Trinseo's technology is used by customers in industries such as home appliances, automotive, building & construction, carpet, consumer electronics, consumer goods, electrical & lighting, medical, packaging, paper & paperboard, rubber goods and tires. Formerly known as Styron, Trinseo completed its renaming process in 1Q 2015. Trinseo had approximately USD4.6 billion in net sales in 2018, with 16 manufacturing sites around the world, and approximately 2,500 employees.

Chemical Activity Barometer down in August

MOSCOW (MRC) -- The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC; Washington, D.C.), fell 0.1 percent in August on a three-month moving average (3MMA) basis, following a similar drop in July and four months of gains, according to ChemicalEngineering.

On a year-over-year (Y/Y) basis, the barometer was flat at 0.0 percent (3MMA).

The unadjusted measure of the CAB fell 0.5 percent in August after a 0.1 percent gain in July. The diffusion index was 59 percent in August. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored. The CAB reading for July was revised upward by 0.58 points and that for June by 0.62 points.

"A pattern of fluctuating CAB readings - months up followed by months down - indicates late-cycle activity," said Kevin Swift, chief economist at ACC. "The barometer signals gains in US commerce into early 2020, but at a slow pace, while rising volatility suggests change may be coming."

The CAB has four main components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators.

Production-related indicators in August were slightly positive. Trends in construction-related resins, pigments and related performance chemistry were slightly positive and suggest slow gains in housing activity. Plastic resins used in packaging and for consumer and institutional applications were also slightly positive. Performance chemistry was soft and US exports were mixed. Equity prices dropped this month, as did product and input prices. Inventory and other indicators were positive.

The CAB is a leading economic indicator derived from a composite index of chemical industry activity. The chemical industry has been found to consistently lead the US economy’s business cycle, given its early position in the supply chain, and this barometer can be used to determine turning points and likely trends in the wider economy. Month-to-month movements can be volatile, so a three-month moving average of the barometer is provided. This provides a more consistent and illustrative picture of national economic trends.

Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.

NOVA Chemicals names new director of sustainability

MOSCOW (MRC) -- NOVA Chemicals Corporation (Calgary, Alberta), a leading supplier of polyethylene in the Americas, is pleased to announce that Sarah Marshall has been appointed to a newly-created role of Director of Sustainability, as per Chemical Engineering.

Marshall will be responsible for leading cross-functional efforts to achieve NOVA Chemicals’ long-term vision for Sustainability. A strong advocate for a plastics circular economy, she will work with supply chain partners, customers, government officials, industry associations and others to help create innovative solutions for plastics recycling and recovery.

Marshall will oversee NOVA Chemicals' portfolio of corporate investments supporting collaboration and promoting ocean health and serve on industry association boards and committees, a role she is well positioned for given her former tenure as Chair of the Board of Directors for the Canadian Plastics Industry Association. She has more than 20 years of research and development experience within the petrochemicals industry, previously leading teams of scientists, engineers and technologists at NOVA Chemicals’ Centre for Applied Research and Centre for Performance Applications. Marshall has experience developing polyethylene products and applications to meet customers’ evolving needs as well as scaling catalyst and process technology advances to deliver desired products. In the last few years, NOVA Chemicals has cultivated a portfolio of recyclable film structure designs for packaging applications, including a recyclable stand up pouch film structure which can be used in food packaging traditionally made with non-recyclable, mixed-material structures.

"I am very excited to lead NOVA Chemicals’ Sustainability Team during this critical juncture for our industry as we work to advance the important role of plastic for society and, at the same time, strive to create a world free of plastic waste,” said Marshall. “I look forward to collaborating throughout the value chain to capitalize on the environmental benefits of plastic materials while finding science-based solutions to address post-use challenges."

As MRC informed before, in June 2019, Chevron Phillips Chemical Company, a joint venture between Chevron Corp and Phillips 66, offered to acquire Nova Chemicals Corp for more than USD15 billion including debt.

We also remind that in January 2017, NOVA Chemicals Corporation, a leading supplier of polyethylene in the Americas, announced the start up of its new world-scale linear low density polyethylene (LLDPE) gas phase reactor at its Joffre, Alberta site.

According to MRC's ScanPlast report, LLDPE shipments to the Russian market increased in the first seven months of 2019 by 8% year on year to 234,130 tonnes. Local producers increased their production by 24%.

Nova Chemical is one of the largest world's petrochemical companies, a manufacturer of polyethylene, styrene polymers, monomers, and many other related products.

Chinese petrochemical expansion to overwhelm Japan and South Korea producers

MOSCOW (MRC) -- A massive surge in China’s manufacturing capacity for paraxylene, a petrochemical used to make textile fibers and bottles, could force leading exporters in Japan and South Korea to cut production as early as the second quarter of 2020, reported Reuters.

China will add about 10 million tones of paraxylene manufacturing capacity from March 2019 to March 2020, according to company reports and officials, that is enough for making 22 trillion 500-milliliter plastic bottles.

The world’s top consumer of paraxylene (PX), China imports 60% of its need for the chemical to feed polyester demand that has more than doubled since 2010. Over half of China’s PX imports come from South Korea and Japan and the new capacity is expected to cut Chinese imports by about 50%.

Without Chinese demand, the profit margins for regional manufacturers such as Japan’s JXTG Holdings Inc (5020.T), South Korea’s Lotte Chemical (011170.KS) and Hyundai Cosmo Petrochemical and domestic producer Dalian Fujia are expected to drop further, likely causing a rollback in output and decline in earnings.

“We will see drastic cutbacks in PX operating rates among many Asian exporters, and potential capacity rationalization in sites where integrated refining-aromatics margins are poor,” said Darryl Xu, principal analyst for Asia chemicals at consultancy Wood Mackenzie.

Private companies are leading China’s latest PX boom through a string of projects often integrated with big oil refineries which make them more cost competitive and flexible.

China’s Hengli Group launched in March a PX plant capable of producing 4.5 million tonne per year (tpy) in the city of Dalian and Zhejiang Petrochemical is slated to start a 4 million tpy plant in Zhoushan late in 2019.

In July, Shandong-based Hongrun Petrochemical began trial runs at its 700,000 tpy plant and China Petroleum and Chemical Corp, or Sinopec, will start a plant in Hainan producing 1 million tpy in the third quarter.

Helen Yang, a researcher at JLC Consultancy, estimated China’s PX imports could fall to 7 million tonnes next year and further to 4 million tonnes in 2021. Imports this year will be 12.6 million tonnes, the first annual decline in over a decade, down from a record 16 million tonnes in 2018.

Expectations of surging Chinese supplies squashed the chemical’s processing margin, or PX’s price over naphtha, a refinery product used to make PX, to below USD320 a tonne in mid-August, versus USD600-USD700 a year ago.

"The USD600-USD700 margin was crazy and unlikely to be repeated,” said Ma Xiumei, a purchasing executive at Hengli Group, which has cut its PX imports by nearly half this year.

Ma Cheng, the head of feedstock purchase at Zhejiang Yisheng Petrochemical, part of a joint venture with the builder of the PX plant in Zhoushan, predicted that the PX margin could slide below USD250 a tonne later this year and even lower in early 2020 after the Zhoushan plant ramps up.

JXTG Holdings said that a deteriorating PX market contributed to its shrinking first-quarter earnings, but the company is still upbeat with demand growth in Asia and also plans to divert some exports to the Americas.

“One of our headaches for the latest earnings was falling margins of PX,” said Yoshiaki Ouchi, JXTG’s senior vice president earlier this month after firm reported a 88% slide in quarterly profit.

Japanese bank Nomura Holdings Inc cut its forecasts for JXTG’s earnings through the 2021 fiscal year following the slump in PX margins.

China could add another 14 million tonnes of PX capacity between 2020 and 2023 said JLC’s Yang, which will contribute to rising gasoline supply in Asia.

South Korean and Japanese PX makers are likely to respond to the rising Chinese supply by diverting output to the gasoline blending pool, as aromatic chemicals like PX are used to raise the octane rating of gasoline. This could add another 150,000 barrels per day of gasoline in Asia by 2021, said Wood Mackenzie.

“(PX) exporters in Japan and South Korea will soon face a dilemma - should they continue to fight for a shrinking export market, or divert aromatics feedstocks into a much bigger gasoline market?” said Wood Mackenzie’s Xu.

Paraxylene is a feedstock for the production of purified terephthalic acid (PTA), which is, in its turn, is a feedstock for producing polyethylene terephthalate (PET).

According to MRC's ScanPlast report, Russia's estimated consumption of PET decreased in July 2019 by 4% year on year. 428,790 tonnes of PET were processed in Russia in January-July 2019. Russia's PET production was 44,430 tonnes in July.