FID on hold pending pandemic control, vaccine availability. First major project to be suspended amid coronavirus.
Nov 23, 2020
“The widespread impacts of a global pandemic, including the challenge it creates in evaluating construction costs and the restrictions it has placed on international travel, are being felt across all industries and businesses, including FG,” said Janile Parks, director of community and government relations, said in an email. “As a result, FG has deferred major construction until the pandemic has subsided and/or an effective vaccine is widely available.”
Work on multiple major petrochemical projects in the US was temporarily suspended or slowed in April and May, during the height of pandemic-related shutdowns that stymied construction activity. Startup dates were pushed back as much as a year for some projects, while others saw delays of a quarter or more.
But FG LA’s deferral of a final investment decision on what the company has dubbed the “Sunshine Project” project marks the first indefinite delay of a major project because of pandemic fallout.
The announcement came after the US Army Corps of Engineers earlier in November suspended a key permit issued for the project in 2019, according to federal court filings. The Corps of Engineers informed the company of the permit suspension Nov. 10, pending a reevaluation.
On Nov. 20, FG LA said in a statement that the Corps told the company that some activity related to the project could resume despite the permit suspension, such as relocation of a local water line and highway improvements.
“FG will continue to comply with all notices and guidance from the Corps during the permit suspension and re-evaluation process,” the company said.
The permit suspension emerged in a federal lawsuit filed against the Corps in January by the Center for Biological Diversity and other groups. The lawsuit alleges that the Corps issued a permit in September 2019 allowing dredge and fill activity without fully examining environmental fallout from wetland destruction and discharge of pollutants from the complex.
The Corps did not prepare an environmental impact statement and issued the permit based on an inadequate environmental assessment that “failed to take the legally required ‘hard look’ at the direct, indirect and cumulative impacts of the Corps’ decision to authorize the construction of the plastics facility and failed to analyze a reasonable range of alternatives to that decision,” the lawsuit said.
The case had been headed for summary judgment, where a judge issues a decision without a trial, when the Corps Nov. 4 asked for a stay until the agency could notify FG LA of its intent to suspend the permit pending re-evaluation of alternatives analysis under Clean Water Act provisions.
The Corps told the company that any work authorized by the permit had to cease pending results of the re-evaluation, which would include a decision “either to reinstate, modify or revoke” it, according to a Corps letter to the company dated Nov. 10 included in the Nov. 13 filing.
In March, FG LA suspended major construction activity at the complex because of coronavirus pandemic concerns, to reduce the number of workers on site.
By May, the company had resumed work on a rail line and re-opened the site’s office, but more substantive work remained on hold pending the final investment decision expected in the second half of 2020.
The first of the Sunshine Project phase, originally targeted for a 2024 startup, includes a 1.2 million mt/year ethane-fed cracker, a 600,000 propane dehydrogenation plant, a 600,000 mt/year polypropylene unit, linear-low-density and high-density polyethylene plants with capacities of 400,000 mt/year each, and a 900,000 mt/year ethylene glycol unit.
The second phase, originally targeted for startup by 2029, includes a 1.2 million mt/year cracker, LLDPE and HDPE plants with capacities of 400,000 mt/year each, and a second 900,000 mt/year ethylene glycol unit.
Permitting documents showed the EG plants will make monoethylene glycol, diethylene glycol, and polyethylene glycol.
Nov 02, 2020
S&P Global Platts has started publishing daily paraxylene CFR Taiwan/China derivatives assessments from Nov. 2, 2020.
Platts first proposed launching PX derivatives assessments in a subscriber note published Sept. 11: http://plts.co/t4q930rcjnI.
The new PX derivatives assessments reflect transactions of a minimum of 1,000 mt. Platts publishes derivatives assessments for six forward months from the month of publication, and the derivatives assessments roll over on the first business day of the calendar month. These derivatives settle on the average of the physical Platts paraxylene CFR Taiwan/China marker (price database code AAQNE00), and are published in $/mt.
For example, on Nov. 2, 2020, Platts will be assessing December, January, February, March, April and May. On December 1, 2020, Platts will be assessing January, February, March, April, May and June.
Platts will take into consideration the latest information sourced from the market up to the close of the Market on Close assessment process at 4:30 pm Singapore time (0830 GMT) for the new derivatives assessments.
Platts considers for publication in its PX derivatives Market on Close assessment process information from companies that are able to participate in the physical PX MOC, subject at all times to adherence with Platts editorial standards. Other entities with interest to participate in Platts MOC assessment may initiate the process via https://www.spglobal.com/platts/en/our-methodology/participation-review
Participants will be able to improve bids and offers at a minimum of 50 cents/mt and a maximum of $1/mt in a minimum of 30 seconds, in line with Platts incrementability standards right up until 4:30:00:999 pm Singapore time, the closing time for the PX physical MOC process in Asia. A one-minute extension period will be triggered by any price move or a re-bid/re-offer in the last 30 seconds prior to the close of the MOC process at 4:30:00:999 pm Singapore time. The period for testing repeatability of a bid or offer traded near the close will be 4:30:01:000-4:31:00:999. Following a trade, the traded bid or offer can be repeated within 30 seconds.
The new daily PX CFR Taiwan/China derivatives assessments are published on the Platts Market Center, Asian Petrochemical Scan and Petrochemical Alert (PCA) pages 214 and 337 under the following price database codes:
Paraxylene CFR Taiwan/China Financial $/mt Mo01 AARNM01
Paraxylene CFR Taiwan/China Financial $/mt Mo02 AARNM02
Paraxylene CFR Taiwan/China Financial $/mt Mo03 AARNM03
Paraxylene CFR Taiwan/China Financial $/mt Mo04 AARNM04
Paraxylene CFR Taiwan/China Financial $/mt Mo05 AARNM05
Paraxylene CFR Taiwan/China Financial $/mt Mo06 AARNM06
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Nov 18, 2020
The methanol industry is watching for changes in US foreign policy under the incoming Biden administration, as well as decarbonization policies that could create new opportunities for the product as a fuel.
Methanol trade flows have been altered in recent years owing to sanctions on Iran, but a potential shift in the US stance on the country could spur increased Iranian production.
Meanwhile on the demand side, there may be limits to growth potential from traditional applications in petrochemicals and formaldehyde production. A more promising outlet for the future could be the shipping sector, which is seeking out alternative fuels to lower emissions.
After Donald Trump took a tough stance on Iran early on in his administration, global methanol trade flows had to quickly adjust to the impact of sanctions on the Middle Eastern producer, leading to an increase in flows from Iran to China.
According to the latest China customs data, Iran sent around 2.25 million mt of methanol to China between January-August, up 26% from the same period in 2019 and up 34% from 2018, when the US re-introduced sanctions on Iran.
Meanwhile, India has seen a significant reduction in Iranian imports since the US stopped granting sanctions waivers to Iran’s key customers, in May 2019.
Between January and August 2020, India’s imports from Iran dropped by 90% compared to the same period in 2019, while imports from Saudi Arabia ramped up by 70% to cover the loss, the latest India customs data showed.
Methanol trade flows could be poised for another change if US President-elect Joe Biden seeks a return to the Iran nuclear deal.
Iran has been a key trading partner for China, accounting for close to 30% of total Chinese methanol imports over the past three years, and is likely to remain so –; but a potential softer approach towards Tehran would likely impact India the most, allowing it to ramp up supply from Iran again.
Removal of sanctions could also allow Iran to meet its ambitious capacity expansion goals. Iranian methanol capacity has almost doubled in the past two years, to 12 million mt in 2020, following the start-up of the Pars Kimiya and Bushehr facilities, both located in Assaluyeh. Based on planned and announced additions, Iran’s capacity could grow to above 30 million mt by 2030, according to market sources, making it the largest exporter of methanol.
Besides Iran, other countries are also planning to expand their methanol capacity. Both the US and Russia will have at least one new unit each starting-up in 2021, with more to come over the coming years.
Methanol-to-olefins (MTO) units in China have been the fastest-growing demand outlet for methanol over the past five years, but the trend may be stalling.
The volume of olefins produced from methanol rose by 90% between 2015-2019, to 4 million mt, S&P Global Platts Analytics data showed, but in 2021, demand is expected to decline at 3.3 million mt.
While MTOs have benefitted from affordable methanol prices in China during 2020, high costs are still an obstacle. Platts Analytics expects methanol-based production of ethylene to cost around $730/mt between 2020 and 2030, compared with $315-420/mt for ethylene production from naphtha during the same period.
Meanwhile, demand for the single largest segment, formaldehyde, which accounts for 20% of global methanol demand, is likely to track global GDP growth, according to market sources.
In short, methanol suppliers will probably have to look beyond traditional demand outlets to find a home for incremental methanol supply.
New opportunities are arising from a policy push for decarbonization, including in the marine transportation sector, where there is interest in alternative fuels.
The trend is driven by the International Maritime Organization’s initial strategy on the reduction of greenhouse gas (GHG) emissions from ships, which seeks to reduce total GHG emissions by at least 50% from 2008 levels by 2050, and CO2 emissions per transport work by at least 40% by 2030.
Methanol is a safe-to-carry clean liquid, readily available at major bunkering hubs, and can significantly reduce GHG emissions.
“Methanol represents an optimal balance of energy density, purity and storage requirements due to it being a liquid at ambient temperature, thereby saving infrastructure costs, handling fees, training and even maintenance,” said chief operating officer at the Methanol Institute, Chris Chatterton.
Chatterton explained that other alternative fuels, like ammonia and hydrogen, but also LNG, have limited support infrastructure in place due to high cost, and can only exist with subsidies in place.
In addition, with a high hydrogen-to-carbon ratio, methanol can be used as a hydrogen carrier, facilitating the transition to a green hydrogen economy.
“Methanol allows for even more hydrogen molecules to be safely and cost-effectively bunkered on board a vessel of any size than either ammonia or hydrogen, on a volumetric basis,” Chatterton said.
From a cost perspective, methanol still faces tough competition from conventional fuels, especially after the oil price crash earlier this year, based on Platts data.
European methanol prices per energy content have been above $10/GJ since July, versus marine gasoil hovering around $6.50-$7.50/GJ. But until February 2020, methanol was competing with marine gasoil due to higher crude oil prices.
Currently there are only 12 methanol-powered tankers in operation, but depending on future prices trends, the methanol industry could grab a bigger slice of the pie.
Subscriber note for FOOD Grade Pellets assessment S&P Global Platts will launch a daily spot price assessment for US recycled polyethylene terephthalate food-grade pellets with effect from November 16, 2020. This assessment follows the July 1, 2020 launch of spot price assessments for US recycled PET flake, and continues to
Nov 16, 2020
Subscriber note for FOOD Grade Pellets assessment
S&P Global Platts will launch a daily spot price assessment for US recycled polyethylene terephthalate food-grade pellets with effect from November 16, 2020.
This assessment follows the July 1, 2020 launch of spot price assessments for US recycled PET flake, and continues to expand Platts’ coverage of the recycled polymers markets in the US.
The recycled PET assessment will reflect clear R-PET pellets traded on the US West Coast normalized to a FOB Los Angeles basis, for loading 3-30 days forward. The assessment will reflect spot transactions with a typical volume size of 1-5 truckloads (approximately 40,000-200,000 lbs). In the absence of market indications, a pricing formula will be used which includes the R-PET flake price as the base level plus a premium to account for variable costs associated with food-grade pellet production. Material should have an intrinsic viscosity between 0.76-0.82 and a PVC content no higher than 10 ppm. Acetaldehyde (AA) levels should not exceed 1 ppm.
The assessments will be published in Polymerscan, on Platts Market Center, the Petrochemical Service on the Platts Platform and on Platts Petrochemical Alert pages PCA 624, PCA 574, PCA 441 and under the following symbols:
AFGPA00 Recycled PET Food Grade Pellets FOB Los Angeles cts/lb
AFGPA04 Recycled PET Food Grade Pellets FOB Los Angeles cts/lb WAvg
AFGPA03 Recycled PET Food Grade Pellets FOB Los Angeles cts/lb MAvg
AFGPB00 Recycled PET Food Grade Pellets FOB Los Angeles $/mt
AFGPB04 Recycled PET Food Grade Pellets FOB Los Angeles $/mt WAvg
AFGPB03 Recycled PET Food Grade Pellets FOB Los Angeles $/mt MAvg
Additionally, a weekly market commentary for the recycled PET markets, published on a Wednesday, will be published on PCA page 1542, and the daily rationale will be published on PCA 1545.
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Platts will consider all comments received and will make comments not marked as confidential available upon request.
Polymerscan is a weekly market report for the global plastic and resin marketplace, specifically designed to help those involved in trading, buying or selling polymers. The report provides you with online and mobile access to the latest worldwide polymer prices, news, and closing market price assessments.
Aug 14, 2020
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• Olefins: Ethylene, Ethylene Glycol, Propylene, Butadiene;
• Aromatics: Paraxylene, Styrene;
• Intermediates: Purified Terephthalic Acid, Acrylonitrile, Ethylene Dichloride, Vinyl Chloride Monomer
How are the petrochemical markets coping with the turmoil in the wake of the coronavirus outbreak, OPEC oversupply, the crude oil price war and subsequent collapse alongside continued structural shifts as the industry responds to climate initiatives? Join our editors and analysts for an informative virtual seminar during EPCA as
Oct 05, 2020
Join our editors and analysts for an informative virtual seminar during EPCA as they connect the dots between downstream petrochemical products and their feedstocks and take a comprehensive view of emerging trends in geopolitics, macroeconomics and global markets.
The International Maritime Organization’s response to climate change in the shape of tighter sulfur emissions limits came into force at the start of 2020 with implications for the energy complex and petrochemicals, driving a move to lighter cracking and a rethinking of the feedstock slate.
Early trade routes for the new supply from North America following the region’s repositioning as a major exporter of polymers were disrupted by tariffs and protectionism before the US-China trade deal signalled renewed arbitrage opportunities and China’s increasing self-sufficiency. Where will new supply find a home in this increasingly challenging and uncertain operating environment?
Burgeoning environmental consciousness in relation to climate change and plastics use continues apace with Europe leading legislative efforts and 2025 commitments refocusing company strategy.
Brand-owners, governments and petrochemical producers are at the forefront of a global sea change, setting targets and taking voluntary measures to increase plastics recycling, including banning single-use plastics and overhauling packaging design.
New York — Global styrene prices sky rocketed in the week started Nov. 8 as supply concerns in Asia, the US and EU caused a run on pricing, supported by firming market sentiment following the report of advancements in vaccine research for the pandemic, as well as strong downstream styrenics demand. The tightness has been […]
Nov 13, 2020
The tightness has been especially visible in the Asian market, causing a run on prices that has echoed into the US and Europe. But with steep backwardation in place in the Asian market moving into December, additional US or EU exports appear unlikely.
CFR China styrene was assessed higher by a whopping $203/mt on the week at $1,170/mt Nov. 13.
H1 December and H2 December domestic East China cargoes were assessed up $81.20-$88.40/mt on an import-parity basis. The surge is a result of tight supply in the market with unexpected turnarounds since the week ended Nov. 7 leaving supply shorter than anticipated.
In Europe, the five-to-30-days forward loading assessment for styrene monomer was last assessed at $971/mt FOB ARA on Nov. 13 — a 13-month high for the market. This was an increase of $128.75/mt from Nov. 6.
Prompt US styrene increased $65/mt since Nov. 6 to $910/mt FOB USG on Nov. 12, also marking a more than 13-month high prior to the Nov. 13 assessment. Sources said December-loading styrene was bid at $935/mt FOB USG on Nov. 13, indicating value of prompt cargoes at least $945/mt FOB USG.
Prior to the news of unexpected turnarounds, supply appeared tight as several plants in China and Southeast Asia are due to complete annual maintenance by the close of the year, resulting in an expected dip in operating rates in the weeks to come.
Although styrene production margins have been exceptionally high, regulations require that plants complete maintenance, sources said, regardless of how wide profits may be.
European styrene production was down significantly in September and October, with two major ARA producers running maintenance works as well as another producer in the South of the continent. Recovering downstream demand for styrene saw stocks draw down more quickly than expected, and a previously long market rapidly flipped to being tight on material.
The lingering effects of hurricane season on the US Gulf Coast, which shuttered one producer for two months and led others to conduct short-lived shutdowns, have combined with the high export demand from Asia to tighten US styrene supply.
Multiple producers have already sold all material loading in November and December, sources said, despite running at near-maximum rates.
The strength in Asia pricing could be short-lived, however, with supply tightness to ease after the arrival of deepsea material, which was heard delayed from November to December. This has created an extreme backwardation in the styrene market, with one saying that a backwardation of $200/mt could be possible given the tightness.
“There are no offers, the bid can be [anywhere],” one source said regarding November-arrival cargoes. Another source said there was “no choice” but to bid at such levels due to the absence of supply.
Activity in Europe has been mostly driven on the prompt, with reports of reduced run rates from a returning producer causing need for market positions to be covered in a hurry. Further talk has pointed to delayed restarts for another to December. With November dates and activity dwindling, backwardation in the market has shifted to December-January, with a $60/mt drop in bid activity seen between the two months.
Sao Paulo — Petrochemical producer Braskem Idesa is investing in an additional ship-unloading pier to increase its ethane imports, Braskem’s CFO Pedro Freitas said Nov. 11. The initiative is part of the “fast track” project, which is responsible to provide imported ethane to the Veracruz complex in Mexico. “We expect that in the beginning of […]
Nov 11, 2020
The initiative is part of the “fast track” project, which is responsible to provide imported ethane to the Veracruz complex in Mexico.
“We expect that in the beginning of 2021 we will be able to import more than 25% of our ethane requirements,” Freitas said.
According to the executive, if working perfectly today, the “fast track” can deliver up to 20% of the complex needs, but this is “very hard to do”.
Mexican state-owned Pemex is Braskem Idesa’s main ethane provider, but the company is struggling to fulfill the agreed amount.
The supply contract signed between the two companies has come under scrutiny after former Braskem Idesa president Emilio Lozoya Austin’s statement was delivered to the Mexican Attorney General’s Office as part of an investigation.
The investigation is looking into claims of corruption in the deal as Mexican President Andrés Manuel López Obrador accuses Braskem Idesa of damaging Pemex in millions of dollars by making the oil company supply Braskem Idesa with artificially low-priced ethane.
“We remain in touch with Pemex to find a constructive solution regarding ethane,” Freitas said.
New York — Prices in several Asian petrochemical markets are expected to remain firm in the week starting Nov. 23 after hitting multi-month highs last week amid improved demand in China and plant maintenance shutdowns, as well as steady to firm upstream prices. Another key factor in most markets this week is 2021 term contract […]
Nov 23, 2020
Another key factor in most markets this week is 2021 term contract negotiations, which may take some focus away from spot trading.
The FOB Korea propylene market hit a 13-month high at $910/mt Nov. 20, supported by the unplanned shutdowns of major plants and delays to other plants’ restarts. The propylene price is expected to receive firmer support this week after Japan’s ENEOS announced it will shut its cracker at Kawasaki with a production capacity of 515,000 mt/year of ethylene and 300,000 mt/year of propylene for about a month from December for emergency repairs, which will likely to lead to supply tightness in Northeast Asia.
Prices of CFR China 2-ethyl hexanol prices jumped $225/mt week on week to a more than two-year high of $1,190/mt Nov. 19 as major plant shutdowns and tight spot supply lifted indicative bids and offers. Prices were expected to continue rising this week as supply is likely to remain under pressure until January, when plants are slated to restart.
Asian methanol prices are expected to remain on an uptrend this week as improved downstream demand in China and potential supply concerns from Iran in winter weigh on sentiment. Methanol prices in South Korea and Taiwan are expected to move in tandem with China’s on the back of healthy acetic acid, methyl tertiary butyl ether, vinyl acetate monomer and formaldehyde demand. However, spot trading activity in Southeast Asia will likely remain thin as a number of end-users are preoccupied with fulfilling their 2020 contractual obligations, trade sources said.
Asian PTA prices are expected to remain rangebound with little change seen for market fundamentals in China. Discussions on a CFR China physical spot basis are expected to remain thin with ample China domestic supply and buyers in India likely to continue actively seeking PTA imports from Northeast Asia due to domestic supply tightness.
Market sentiment for Asian polypropylene remains firm, with high and limited offers for dollar-denominated cargoes and PP stocks in China seen healthy to low. Supply seems relatively tight in some regions of Southeast Asia, as well as in India. The January PP futures contract rose Yuan 290/mt from the Asia afternoon close Nov. 20 to Yuan 8,813/mt at the Nov. 23 morning close at 11:30 am Singapore time (0330 GMT).
Surging freight costs and limited container availability are expected to continue weighing on Asian recycled PET flakes exports, especially to Europe and the US. Some Southeast Asian recyclers are still facing backlog orders due to container delays and weak demand, according to sources, who generally viewed the Asian recycled PET market as lacking direction in the short term.
OX prices are likely to remain at a strong premium to paraxylene due to a firm downstream market, with prices and production margins for phthalic anhydride remaining firm and profitable, giving traders and producers of OX a bullish market view.
The movements in crude oil and paraxylene are likely to be the main factors to impact isomer-grade mixed xylene this week as term negotiations take some focus away from the spot market.
All eyes are on negotiations for 2021 term toluene supply this week, with a few Southeast Asian producers having clinched contracts with term lifters as South Korean producers start discussions. Supply remained a little tight on the back of lower refinery utilization rates, and participants expected the production curb could extend into the January trading laycan.
Asian solvent mixed xylene market participants are closely monitoring demand in net-importing regions this week amid signs of tapering demand and a toppish price trading range in India and Southeast Asia, with CFR India solvent-MX closing Nov. 20 at $500/mt, the lowest in nearly a month. The recent strength in solvent-MX has been slipping away as inflows of solvents into India increase and demand retreats mildly post festive season.
Increase effective Dec. 1. PP spot export pricing stable on week.
Nov 19, 2020
The increase is in addition to any change in monomer pricing, Total said Nov. 18 Formosa Plastics said the same day that the increase is in addition to any change in polymer grade propylene contract pricing.
However, the specialty grades may be subject to a price increase of a different amount, Equistar Chemicals said Nov. 17.
All three companies were unavailable for comment Nov. 19 on the announced increases.
The three producers also separately reconfirmed the increase is in addition to their previously announced 4 cents/lb increases, effective Nov. 1, for all polypropylene products.
The proposed increase comes amid a time where there’s no availability for export in the polypropylene market, sources have said.
“Polypropylene is tough, it’s still firm and we aren’t getting anything from the US producers,” one trader source said.
In general, market participants have seen little to no availability for exports and traders have said pricing is unworkable.
S&P Global Platts assessed export homopolymer injection-grade polypropylene stable week on week at Nov. 18 at $1,268/mt FAS Houston.
Domestic PP pricing was assessed flat on the week at 54.5 cents/lb delivered rail car basis for homopolymer injection grades. Pricing includes a market-accepted 18-cent premium over settled October feedstock PGP contracts at 36.5 cents/lb. Domestic pricing was also stable on the week at 56.5 cents/lb delivered rail car basis for homopolymer fiber, which maintained a 20-cent premium over the PGP contract.
In this week’s pick of big themes in energy and commodity markets, solar power shows resilience in the face of coronavirus headwinds, steel price gains in the US outpace other regions, and butadiene, a key raw material for tire manufacture, stages a recovery. Plus, US gas market fundamentals and Vietnamese crude trade. 1. Solar investment […]
Nov 23, 2020
In this week’s pick of big themes in energy and commodity markets, solar power shows resilience in the face of coronavirus headwinds, steel price gains in the US outpace other regions, and butadiene, a key raw material for tire manufacture, stages a recovery. Plus, US gas market fundamentals and Vietnamese crude trade.
What’s happening? The growth outlook for solar power remains upbeat as China recovered quicker than anticipated from the coronavirus crisis, while decarbonization policies gain momentum across the globe with China, Japan and South Korea joining Europe in pledging carbon neutrality. Concerns about the pace of solar deployment in China are fading as 2020 additions have slowly climbed above last year’s level despite unwinding subsidies.
What’s next? Global solar capacity additions are set to rise almost 50 GW more than previously forecast over the next six years, according to a new report by S&P Global Platts Analytics. The unit upgraded its 2020 to 2025 forecast by 7% or roughly 8 GW/year, with some 690 GW of new solar capacity to be added during the period. Europe’s solar PV prospects are brightest, but further upside could emerge in the US, as the incoming Biden administration could help support extension of the federal Solar Investment Tax Credit, which has been a major driver of new capacity. The outlook for India remains more uncertain, as plant additions have slowed due to COVID-19, but a large pipeline of solar PV projects is in place and solar PV remuneration in capacity auctions remains particularly competitive relative to coal.
What’s happening? A supply shortage is leaving buyers scrambling for steel in the US and causing prices to skyrocket. The daily S&P Global Platts US hot-rolled coil price is up nearly 70% is just over three months. Typically the highest-priced market in the world for hot-rolled coil, the US was trading at a discount to European and Asian markets as coronavirus-related disruptions started later in the US. Prices globally are also increasing but at more moderate rates: Platts’ FOB China HRC price is up by nearly 44% since its coronavirus-related low in May, while Northern European HRC is up 42%.
What’s next? There is no relief on the immediate horizon, as buyers face limited buying options into the first quarter of 2021. Some US original equipment manufacturers and end-users face potential shutdowns as the supply chain remains tight on steel through the end of the year, according to numerous market sources. Rising coronavirus cases are adding to the woes with ArcelorMittal USA facing production disruptions as the outbreak impacts workers. Buyers are stranded with limited domestic or foreign options to fill supply needs in the next two to three months, leaving domestic mills able to continue to increase prices.
What’s happening? Butadiene, a key raw material for making automotive tires, has recovered from the price slump seen in spring and early-summer, when it reached historic lows following the shutdown of downstream tire producers globally, amid coronavirus-related restrictions. Strong third-quarter demand for synthetic rubber in the Asian automotive sector has caused a dramatic rise in butadiene prices globally, and combined with limited exports from the US Gulf following several severe hurricanes, has reopened the key arbitrage from Europe to Asia.
What’s next? High Asian demand for butadiene is set to continue into the new year amid bullish downstream sentiment, driven by synthetic rubber markets and also ABS plastic, used in household goods and electronic applications as well as in the auto sector. On the flipside, concern remains that the start-up of new production plants in Asia will dampen the appetite for deep-sea imports once ongoing major production outages in this region are resolved. Asian consumers have been reluctant to take cargoes beyond Lunar New Year 2021 due to uncertainty over future price movements, but more clarity is expected in December.
What’s happening? Warm temperatures in the US are raising the possibility of weaker-than-usual winter gas demand and corresponding downside to prices. November to date US heating demand has averaged just 26.9 Bcf/d, nearly 30% below 2019 equivalent, S&P Global Platts Analytics data shows. The Northeast, which accounts for over one third of the US winter heating market, contributed nearly half the lost demand in November at US level. Benchmark US gas prices have fallen sharply as a result.
What’s next? Mild US weather could endure through at least February, according a National Weather Service forecast issued Nov. 19. In December, January and February, the US Northeast, the South and much of the West face a 33% to 40% risk for above-average temperatures. In states stretching from Arizona to Florida, the upside temperature risk is even higher – estimated at 50% to 60%. With Northeast gas storage currently estimated at 1.051 Tcf – just 23 Bcf below the region’s record-high level recorded Nov. 11 – lower demand this season could keep inventories elevated through March, potentially perpetuating the pressure on Northeast gas prices through next summer.
What’s happening? China’s state-run refiners are regular buyers of medium and heavy sweet Vietnamese grades including Su Tu Den, Ruby, Dai Hung and Bach Ho. However, they cut their average run rate to around 78.9% in October, which marked the third consecutive monthly drop from a six-month high of 83.1% in July. The growing possibility of more refinery closures in Australia could also significantly curb Vietnam’s crude exports in upcoming trading cycles, as Oceania refiners are important customers of light and medium sweet Vietnamese grades like Chim Sao and Thang Long.
What’s next? Vietnam exported 270,006 mt (63,843 b/d) of crude in October, down 44.6% year on year and 35.3% lower than September, customs data showed. Vietnam’s crude exports could fall to around 1.13 million mt in Q4, down 20% from the third quarter, according to traders based in Singapore and Ho Chi Minh City surveyed by S&P Global Platts. Price differentials for Vietnam’s flagship export grades Bach Ho and Su Tu Den have come off by more than $1/b since Q3. Bach Ho crude was assessed at an average premium of 33 cents/b to Dated Brent to date in Q4, compared with $1.43/b in Q3.