Americas Chemical Industry Outlook for 2017
ICIS Editorial
11-Jan-2017
HOUSTON (ICIS)–The following OUTLOOK ’17 stories were published by ICIS news between Wednesday 21 December 2016 and Thursday 5 January 2017. Please click on the headlines to read the full versions.
OUTLOOK ’17: US ethylene faces
tight supply ahead of cracker start-ups
Several new crackers are scheduled to begin operations in
2017, but tight supply could push up US ethylene prices
before new capacity comes online. The start-up of four new
crackers, as well as the restart of an idled unit, will
expand existing US ethylene capacity by more than 5.4m
tonnes/year.
OUTLOOK ’17: US ethane demand to
strengthen on new crackers, exports
US ethane prices have doubled since the beginning of 2016,
mostly owing to much stronger natural gas and crude oil
values. Demand was limited and supplies were strong when the
year began. Export terminals were still under construction,
and ethylene plants were starting the first wave of a heavy
turnaround season that lasted most of the year.
OUTLOOK ’17: Abundant supply may
weigh down US propylene
Pressure on the US propylene market is likely to persist in
2017 as supply is expected to remain long because of
increased production, ample inventories, as well as overall
steady demand. New propylene capacity is scheduled to come
online in 2017 with the start-up of a new propane
dehydrogenation (PDH) unit in Mont Belvieu, Texas.
OUTLOOK ’17: US BD to continue
slow growth amid ample supply
US butadiene (BD) market participants are expecting much of
2017 to be similar to 2016, with supply ample but not overly
long and with demand continuing to expand slightly. Domestic
production of BD should remain strong as ethylene demand
drives olefins producers to operate crackers at high rates,
resulting in greater output of Crude C4 (CC4) from which BD
can be extracted.
OUTLOOK ’17: Tight US styrene
market poised for turnarounds
The US styrene market is entering 2017 with tight supply and
high prices, amid unexpected shutdowns in late 2016 and
upcoming planned turnarounds in the first quarter. US styrene
spot prices began to firm on 13 October, and by early
December prices hit the highest level since August 2015.
OUTLOOK ’17: This could be year of
the ‘Braskem Effect’
What sounds like a thriller novel, the “Braskem Effect” will
become a recognisable data point in North American
polyolefins in 2017. Some experts expected the startup of
Braskem Idesa’s Ethylene XXI joint venture cracker and
polyethylene (PE) project in Veracruz, Mexico, to have a big
impact on US producers in early 2016. But the delayed startup
of the project, which finally was inaugurated in May,
postponed the fallout for a few months.
OUTLOOK ’17: US PP could see
sellers’ market in 2017
With the threat of imports over in the US polypropylene (PP)
market and inventory levels in decline, buyers could see the
balance of power shift back to producers in 2017. “Margin
expansion is a definite threat in 2017,” a veteran PP watcher
said. That raises the spectre of 2015, when PP producers
expanded their margins by 1-2 cents/lb each month as
feedstock propylene declined.
OUTLOOK ’17: US virgin, recycled
PET markets optimistic
The US virgin polyethylene terephthalate (PET) and recycled
polyethylene terephthalate (R-PET) markets are expected to
improve in 2017, as compared to a pessimistic outlook in
2016. This is due primarily to new capacity in Texas, along
with less restrictive recycling and labeling laws in several
US states, and higher supplies of virgin PET.
OUTLOOK ’17: US PS supply
adequate, demand on the rise
The US polystyrene (PS) market will begin 2017 with adequate
supply and stronger demand, especially after the slow demand
months of November and December. The final two months of 2016
saw PS market participants involved in inventory management.
January, however, is a month in which demand will rise back
to a more normal level.
OUTLOOK ’17: US EPS poised to
increase again in Jan
US expandable polystyrene (EPS) prices are poised to increase
again in January, after notching a fairly large increase in
the final month of 2016. Costs in the market had increased
beyond where they were when December price increase
nominations were announced. As a result, one producer said
that it might announce a January price increase.
OUTLOOK ’17: Strong chemical
M&A market to persist
The desire for deals is strong and conditions ripe for a high
level of chemical mergers and acquisitions (M&A) activity
in 2017. A number of mega mergers – the highest profile being
Dow/DuPont – are pending regulatory approvals, while other
major and mid-market deal activity chugs along. One striking
aspect of today’s chemical M&A market, and one of
considerable debate, is the persistently high valuations –
the result of an abundance of money chasing a limited number
of deals.
OUTLOOK ’17: US SBR monitoring
imports, new tyre plants
US styrene butadiene rubber (SBR) supply and demand in 2017
will depend on how many imports the region will continue to
see, as well as how much domestically made rubber will be
consumed by new tyre plants. In the major downstream market
for tyres, there have been a number of antidumping and
countervailing duty investigations on imports from various
countries.
OUTLOOK ’17: US ABS demand to
begin on strong note
US acrylonitrile-butadiene-styrene (ABS) demand in the first
quarter of 2017 is expected to be bolstered by higher Asian
ABS prices. ABS demand typically drops off in November and
December due to seasonality factors, but higher prices in
Asia began impacting demand for US product in December.
OUTLOOK ’17: US polycarbonate
growth tied to economy
US polycarbonate (PC) demand is expected to be strongly tied
to US economic performance in 2017, with supply remaining
long to balanced on imported product. While several other
phenol derivatives could rebound on increased crude oil
production, oilfield uses are not a major end use for PC.
Most demand in 2017 will come from the construction, pipe and
automotive industries.
OUTLOOK ’17: US nylon showing
signs of strength
Expectations for the nylon market in 2017 are for a little
more balance than in 2016, after some rationalisation. Nylon
6 supply had been long through most of 2016 amid global
oversupply of feedstock caprolactam (capro). In 2016, there
was little effect on freely-traded nylon 6 and capro prices
amid rising prices for benzene, which is used to produce
capro, in the second and third quarters.
OUTLOOK ’17: Chemical stocks rally
with US markets
Many of the chemical stocks traded on US exchanges recovered
from their lows reached in the early part of 2016 and
approached their 52-week highs. ICIS follows more than 60
chemical, midstream and fertilizer stocks that are listed on
various US stock exchanges. Out of these, several were close
to their 52-week highs as of 9 December.
OUTLOOK ’17: US benzene strong,
but uncertainty remains
While benzene values had been strengthening in late 2016, the
market is uncertain that the strength will hold moving into
2017. A rally for upstream crude oil values lifted benzene
prices in early to mid-November. On the supply side, there
was tightness in the benzene market due to issues at several
US Gulf refineries.
OUTLOOK ’17: US xylenes to see
higher demand, fewer exports
The US xylenes market enters 2017 in the midst of a major
shift in the country’s position in global trade flows.
Historically, the US has been a significant net exporter of
both mixed xylenes (MX) and MX derivatives, principally to
Asia. In recent years, however, Asia has been building up
large new capacity reserves of both MX and paraxylene (PX),
the most widely-used MX chemical derivative.
OUTLOOK ’17: US toluene to track
gasoline, aromatics
US prices for toluene are likely to follow developments in
markets for gasoline and other major aromatics such as
benzene and xylene. The US toluene market is structurally
long with much recoverable product being left in the gasoline
pool.
OUTLOOK ’17: Sulphur fluctuations
lead to uncertainties
Sulphur prices in North America moving into the New Year are
somewhat uncertain, as weak phosphates markets and a recent
spike in sulphur prices battle against one another. Benchmark
prices have gained ground from multi-year lows earlier in
2016. Some of this is connected with stronger prices in China
starting in October, which came as somewhat of a surprise to
the global market.
OUTLOOK ’17 Analysts cautiously
optimistic on US economy
The results of the US presidential election were undoubtedly
the largest factor influencing the outlook on America’s
economy going into 2017. However, the uncertainty following
the election leans more towards optimism, according to the
year-end economic forecast from the Institute for Supply
Management (ISM).
OUTLOOK ’17: US caustic soda to
soar on alkali wings
For US liquid caustic soda, historically a slow-growth,
mature chemical commodity, 2017 is expected to be a growth
year for US material. In fact, the forces that pushed US
liquid caustic prices higher in 2016 are only expected to
gain strength in 2017 and are likely to keep pushing well
into 2018, according to a growing market consensus.
OUTLOOK ’17: US PVC expected to
show more growth
The US polyvinyl chloride (PVC) market saw robust growth and
firming prices in 2016, and 2017 looks to be more of the
same. The new growth marks a stronger rebound from the Great
Recession of 2008-2009 that put US construction activity in a
deep chill from which it is still recovering.
OUTLOOK ’17: US HCl gains hope
with drilling rise
For the US hydrochloric acid (HCl) market, there is one thing
that most participants agree on: 2017 is likely to be better
than 2016. Or 2015. For the first time in two years,
producers and sellers were able to get a price increase
implemented in late 2016 when drilling activity began to
recover after bottoming out in May.
OUTLOOK ’17: US plasticizers face
shortages, new capacity
The US plasticizers market will enter 2017 with shortages of
di-isononyl phthalate (DINP) and di-isononyl-cyclohexane
dicarboxylate (DINCH) due to several force majeure
declarations in western Europe. This will be partially offset
with new US capacity of dioctyl terephthalate (DOTP) in early
2017.
OUTLOOK ’17: First US cracker wave
to start in New Year
The first wave of new US cracker and polyethylene (PE) plants
will start operations in the new year. Five crackers are
expected to start up in 2017, including the restart of an
idled unit by Indorama. In all, they will add 7m tonnes/year
of capacity.
OUTLOOK ’17: US methanol demand,
production set to grow
US methanol demand will only become stronger in 2017, but so
will domestic production capacity. The start-up of OCI’s
Natgasoline methanol plant in Beaumont, Texas, is on schedule
to start production in the second half of 2017. At 1.8m
tonnes/year, it would be the largest operating plant in the
country.
OUTLOOK ’17: Softer Q1 US acetic
acid, VAM markets
US vinyl acetate monomer (VAM) supplies will be healthy to
start 2017, with no ongoing supply issues or production
problems. Market sources are saying that the planned
turnaround season will begin at the end of Q1 2017, at which
time supply will tighten somewhat.
OUTLOOK ’17: US BDO in a
turnaround, or something else
A question the US butanediol (BDO) market may or may not
answer in 2017 is how to characterise the current price
trend. Is it a turnaround or just a hiccup? US BDO’s price
history over the past decade shows three price turnarounds, a
reversal in price followed by a sustained trend.
OUTLOOK ’17: US ACN market
expected to remain tight
The US acrylonitrile (ACN) market is anticipated to remain
tight in 2017, as participants expect ongoing supply
disruptions, particularly in the first half of the year. US
producers INEOS Nitriles and Cornerstone Chemical both have
planned turnarounds scheduled for May 2017, which will keep
US supply tight.
OUTLOOK ’17: US chemicals expected
to keep momentum
With another year of mergers and acquisitions (M&A), the
US chemical industry continued to grow in 2016, and multiple
factors, ranging from optimistic opinions on the next
presidential administration to investment and abundance of
shale gas, have poised the industry for expansion in 2017,
according to the American Chemistry Council.
OUTLOOK ’17: US biodiesel faces
new level of uncertainty
The highly politicised US biodiesel industry faces more
uncertainty than ever before amid increasing
federally-mandated blend volumes and in addition to concern
that the $1/gal federal tax credit will not be renewed. In a
surprising move for the industry, President-elect Donald
Trump has nominated Oklahoma Attorney General Scott Pruitt to
run the US Environmental Protection Agency (EPA). The choice
puts in charge one of the agency’s most hostile critics and a
sceptic of climate change science.
OUTLOOK ’17: US glycerine market
could see more balance
Prospects for a more balanced markets are looking better for
glycerine in the coming year. The US glycerine market is
facing structural changes amid new food safety requirements
and price stabilisation prompting increasing substitution
into polyols and glycols markets.
OUTLOOK ’17: US mid-cut fatty
alcohols face feedstock pressure
Feedstock pressures will continue to push on US mid-cut
detergent range fatty alcohols moving into the first quarter
of 2017. Benchmark lows marked the first quarter of 2016 as
C12-14 natural fatty alcohols were broadly oversupplied and
at least one new importer entered the US market with
aggressive pricing.
OUTLOOK ’17: US paraffin wax flat
on supply/demand
The US paraffin wax market is flat going into 2017 as
supply/demand fundamentals are widely balanced amid little
expectation that the situation is likely to soon change. A
key factor is that the wax is an immediate by-product of the
solvent neutral process of base oil production.
OUTLOOK ’17: US TiO2 anticipating
a sellers’ market
US titanium dioxide (TiO2) market participants expect
conditions in 2017 to begin to favour producers. In a market
that has historically reflected oversupply and thin margins
even during peak demand from its principal downstream paint
and coatings sector, the tide may begin to turn this year.
OUTLOOK ’17: US acrylates expected
steady amid snug supply
US acrylic acid and acrylate esters demand in 2017 is likely
to trend flat with 2016 or fare slightly better, in line with
higher GDP forecasts. Most sources pegged year-on-year growth
in 2016 at an average of 5%, and 2017 estimates are similar,
especially with GDP estimated stronger but not significantly.
OUTLOOK ’17: US oxo-alcohols
demand expected flat
US oxo-alcohols demand in 2017 is expected to be flat to
slightly better than in 2016 – especially if winter is
broadly mild. Most sources pegged year-on-year growth in 2016
at an average of 5%, deriving principally from demand from
the predominant downstream paint and coatings sector.
OUTLOOK ’17: No major changes
expected for US etac
Participants in the US ethyl acetate (etac) market are
anticipating a stable price environment in 2017, based on
expectations of no major changes in market dynamics. Price
movement during 2016 trended upward, continuing a recovery in
US etac prices that began in November 2015. Previously,
prices had reached multi-year lows in the second half of
2015.
OUTLOOK ’17: US butac market seen
steady to stronger
US butyl acetate (butac) market participants generally see
tepid to mildly improved conditions in 2017, hinging
primarily on domestic economic expectations. While some
sources said year-on-year demand is unlikely to change much
for 2017, others expect some improvement based on 2017 GDP
estimates. The domestic butac market broadly follows GDP
because of its primary downstream markets.
OUTLOOK ’17: Too many ships, the
issue for chem shipping
The problem seems to never go away for chemical shipping,
though there are years when it is only a minor or secondary
issue. But 2017 will probably not be one of those years. Most
forecasts put the problem of too many ships as the central
issue for that sector, not only in the coming year but in the
next few after that.
OUTLOOK ’17: US IPA, MEK could
move in opposite directions
Participants in the US methyl ethyl ketone (MEK) and
isopropanol (IPA) markets could see prices for the two
solvents move in opposite directions in 2017. In the US IPA
market, participants will continue watching upstream
propylene costs for price direction. One change for 2017 is
that US suppliers are separately establishing a higher price
for US pharmaceutical grade IPA.
OUTLOOK ’17: US acetone could face
import challenges
The US acetone market could face some import challenges on
tight supply and steady margins as the market takes some time
to return to a balanced position. Sources said that although
the US should have a feedstock advantage, length in the Asian
market could put pressure to move product into the US.
OUTLOOK ’17: US phenol margins
likely steady
With Asian production levels strong and US domestic demand
steady, sources expect that phenol margins for 2017 producers
will stay close to steady. Discussions for adders over
benzene costs have been firmly in the 8-12 cent/lb
($176-265/tonne), which buyers have described as a rollover
and producers have described as a slight increase.
OUTLOOK ’17: Tight supply, soft
demand balance Q1 US MMA
US methyl methacrylate (MMA) markets will be balanced to
start 2017, with tighter supply balancing softer demand.
Softer demand fundamentals are likely to extend into the new
year. Demand will pick up over the summer during the peak
coatings season.
OUTLOOK ’17: Brazil, Argentina to
resume growing
The recessions in South America’s two largest economies
should end in 2017, while the prospects for Mexico will dim.
Brazil should finally return to growth after two consecutive
years in which GDP shrank by more than 3%. Argentina, South
America’s second largest economy, should recover from the
shock treatment of the reforms by its new president.
OUTLOOK ’17: Demand key to Latin
America PS, PP, PE
Latin America markets are expected to grow in 2017 for
polystyrene (PS), polypropylene (PP) and polyethylene (PE),
but the main challenge will remain the revival of end-user
demand. Several polyolefin markets also face various issues
with feedstock supply, while possible mergers and
acquisitions could complicate the future.
OUTLOOK ’17: Brazil’s ethanol
industry poised for growth
Brazil’s ethanol sector could be poised for growth in 2017
after being mired in the doldrums in recent years. The 2017
sector outlook for Latin American sugar and ethanol has
shifted to positive from negative, according a new Fitch
Ratings report released in December.
OUTLOOK ’17: Latin America caustic
soda soft but steady
he Latin America caustic soda market is projected as steady
but soft in the face of troubled economies in South America.
Demand in Latin America from major consuming industries such
as pulp/paper, alumina, and soaps and detergents is stable
though not spectacular.
OUTLOOK ’17: Latin American PVC
soft in first quarter
The outlook for the Latin American polyvinyl chloride (PVC)
market into early 2017 is generally soft, but with variations
depending on the hemisphere and on the country. In Mexico, as
in the US, winter slows the key PVC consuming sector, the
construction industry, which will gradually recover with
warming weather in the spring and rise significantly during
the summer. In South America, the seasonality reverses.
OUTLOOK ’17: Asia’s rising PET
pressures Latin America
Polyethylene terephthalate (PET) markets in Latin America are
facing upward pricing pressure from recent hikes in Asia.
Market participants discussed higher PET prices for Latin
America, with likely implementation in January, despite
abundant supply amid moderate demand.
OUTLOOK ’17: US EG increase
expected at start of Q1
US ethylene glycol (EG) contracts are expected to rise in
January as higher Asian prices open up an arbitrage
opportunity for US exports, tightening domestic supply. Spot
import prices in Asia have been surging amid bullish market
sentiment fueled by anticipation of tighter supply, stronger
crude oil prices and inventory building activities.
OUTLOOK ’17: US MA faces upward
pressure from butane
US maleic anhydride (MA) prices are under upward pressure
heading into 2017 amid sharply higher costs for feedstock
butane. Prices were stable through most of 2016, in part due
to a relatively narrow range for upstream butane costs.
OUTLOOK ’17: US soda ash
production, demand rises
Production from trona mines in the US increased during much
of 2016, leading to a slight rise in soda-ash output. Demand
for natural US soda ash in Asia is expected to increase in
2017 due to a supply crunch in the synthetic Chinese soda ash
market.
OUTLOOK ’17: Stable to softer for
US polyether polyols
The outlook for polyether polyols remains soft for early
2017, after US prices ended 2016 at an average of 3 cents/lb
below the levels seen at the start of the year. Polyols
prices did not recover during the year in spite of an upward
tick during the third quarter driven by strong increases in
the costs of feedstock propylene.
OUTLOOK ’17: US MPG to follow
feedstock propylene
The US monopropylene glycol (MPG) market is anticipated to
remain largely stable in 2017, with pricing expected to
follow the movement of feedstock propylene. Market
participants said that propylene prices are generally
expected to be steady-to-lower in 2017, which in turn could
see MPG prices move in a corresponding manner.
OUTLOOK ’17: Imports remain driver
for US epoxy market
Imported product arriving at a discount and margin pressures
are expected to remain the biggest drivers in the US epoxy
resin market for 2017. Producers in the US pushed for several
price increases, but were met with strong resistance, given
ample supply in the market. Pricing in 2017 is expected to
face similar dynamics.
OUTLOOK ’17: US PX capacity flat,
utilisation rates up
Capacity for the US paraxylene (PX) market will likely be
flat through 2025. Over the years, the economic crisis, along
with problems specific to the PX sector, has led to some
capacity rationalisation. While capacity is expected to
remain steady, demand should rise because of a new derivative
plant set to start up in the second quarter in Texas.
OUTLOOK ’17: US TDI rise on
supply, MDI stay steady
US prices for isocyanates are mixed heading into the new
year, with prices for toluene di-isocyanate (TDI) shooting up
on global supply tightness while prices for methyl
di-p-phenylene isocyanate (MDI) are following a mostly steady
trend. In the TDI market, tight supplies have resulted in
significant upward movement in major global markets.
OUTLOOK ’17: US natural gas prices
could soar
The US natural gas market entered this year’s winter demand
season with storage near record high levels. But with exports
to Mexico expected to increase, fewer coal plants supplying
the power grid and production predicted to fall for the first
time since 2005, there are concerns that a
colder-than-expected winter could lead to spikes in domestic
gas prices.
OUTLOOK ’17: Trump should help
maintain crude prices
The election of Donald Trump has created exuberance and
global anxiety at the same time by turning the world order on
its head on the back of a wave of anti-establishment
sentiment. From a geopolitical point of view, the US remains
in a strong position of energy security, if not energy
independence, and this will prevent the use of oil by other
nations as a political tool.
OUTLOOK ’17: Americas base oil
industry embracing regulatory changes
The Americas base oil market is continuing to work to meet
the regulatory changes fostered by the US Environmental
Protection Agency (EPA) that have dominated the industry for
several years. The base oils and lubricants industry has
worked to improve carbon emissions controls and other key
elements of the EPA stipulations.
OUTLOOK ’17: US melamine to take
cues from global market
The US melamine market in 2017 will take its cues from global
supply and demand patterns, which will go a long way towards
determining prices in the first quarter and beyond. Global
demand is quite strong, and ongoing supply problems in China
continue to have an impact across the world.
OUTLOOK ’17: Future of US ethanol
tied to energy policy
US fuel ethanol prices in 2017 will be largely determined by
the energy policy of the incoming Trump administration. The
energy policy of President-elect Donald Trump will affect
future OPEC production, as well as Environmental Protection
Agency (EPA) mandates and regulations, which in turn could
influence the movement of ethanol prices.
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