Americas Chemical Industry Outlook for 2017

ICIS Editorial


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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