What is the Townsend outlook relative to the PE export market dynamics in 2009 Speaking of PE margins, what is the current margin differentials between heavy feedstock vs. light feedstocks in North America
It costs slightly more to refine heavy feedstocks, so I would bet the non-integrated producers that have to purchase ethylene on the open market are the squeezed producers. However, all these plants are very efficient, so on a percentage difference basis, the difference is 3-4% maximum.
Do you predict a shortage supplies of PP?, and what is the expectation in price , from now to end of 2008, for both PP & PS Do you predict for the PP a shortage of supplies this material?
I do not believe we’ll see a significant shortage of supply, although the export market will keep domestic supplies tight. There are outages, but the domestic demand is weak enough that I believe they’ll keep the market merely snug. As to price, I suspect we’ll see a steady decline in pricing after September, assuming that crude oil prices continue to slip.
May you tell us how much the PMM reports are used in this field among the other resources? How do you & PP producers structure their PP prices in the middle east?
The PMM reports are used by hundreds of converters and many of the top suppliers as a pricing resource. We do not encourage people to use us an index, but rather as a benchmark. It covers U.S. and Canada only. As to the Middle East, while we are very active with consulting projects there and do have a partnership with AMD Consulting in Saudi Arabia, we do not offer a pricing service for the region.
When do you think the plastics market is going to be stable in India?
Honestly, this is out of my field. This would be a better question for one of our global consultants, such as David Anderson or Dave Durand. However, I believe you’ll see increased consumption in India for the next several years, with much stronger growth there than in North America.
What about your preview about EVA resin price?
I’m sorry, we do not cover EVA resin pricing. The PMM reports cover PE, PP, PS, PVC and PET resins. We have looked at doing a report on some of the engineering resins, but we have no plans to launch any additional projects soon.
If crude oil continues a down slide do you feel the 8-12 cent per # increase being announced for 8/1 on PP is justified and the leveling off or decline would start in Sept?
If oil continues to slide heading into August, it’s very doubtful that propylene will settle up again, or even roll over. Any resin price increase is based on feedstocks, and if there’s no increase in feedstocks, there will be no resin price increase.
What are the fundamentals that have moved propylene higher than ethylene recently and why you believe this change in price relationship will continue?
Traditionally, propylene prices run slightly above ethylene, but they do flip-flop every now and then. I’ve put the chart below to help show the relationship over the past few years. Since early 2004, propylene has often taken the lead. I suspect this is because of the rising cost of gasoline and the ties between propylene and gasoline prices. But that’s just my guess. My area is really the market price of resin, not feedstocks.
Increasing demand of energy in china effect on prices of oil how do you think?
Without a doubt, the demand from China and other developing economies is having a huge impact on oil prices. There’s a finite supply of crude oil and increasing demand. That’s a mixture that spells higher prices.
The natural gas increases have been as great as or greater than oil. What affect will natural gas prices have on the PE market for the balance of the year?
If natural gas prices operated in a vacuum and could stay low while crude oil skyrocketed, we would see North American resin prices substantially lower. However, crude oil will drag up natgas prices, just as U.S. resin prices are going to be pulled higher by international prices.
What is happening with pricing on PMMA - short term and long term? In addition - the two feedstocks - Acetone and Methanol.
I’m sorry, we don’t cover PMMA.
Can you talk about how Townsend gathers data to make the monthly resin pricing nominations, what are your methods and calculations? Who do you gather from?
Price nominations are set by suppliers, and we obtain these either directly from the supplier or through buyers that pass the letters on to us. As to our methodology on collecting price data, we have a large group of resin buyers that participate in our survey and provide data each month. We use this data to produce our prices. Ours is the only buy-side pricing service in the industry.
Price increases have been rapid, I will be questioned as to why when oil drops it will take time to lower resin prices, you mentioned up to 3 months. You mentioned material substitutions, are they really feasible and what resins can substitute for PP, PE or ABS.
There are substitutions out there, I would recommend checking with IDES for details on what resins would make the most practical alternative. As to the delay in seeing the price decrease after oil drops, I think it’s two things: 1) Each stop on the supply chain is a separate price negotiation (crude oil, then ethylene, resin, finished goods), and so it takes some time for that lower-priced crude to make its way along the chain; 2) Suppliers will be in no hurry to rush the crude oil discount on to the market.
What is the cost change lag time between the North American market and the far east market?
I don’t know if there’s a lag so much as prices in one region influence prices in another. But in theory, if resin prices drop in the U.S. to where it’s financially rewarding to ship resin overseas, then distributors will act quickly to move resin.
How exactly do the feedstocks flow through to the resins, and how genuine is their effect on the market?
Assuming you’re talking prices, it varies depending on the type of resin. But, as far as PE and PP go, it’s pretty straightforward – a penny increase in feedstock costs is a penny increase in resin cost.
How do spot ethylene & propylene buyers impact resin prices compared to contract buyers?
I believe there’s not a lot of spot ethylene and propylene out there, not in the true spot market sense, so there’s very little impact on the resin market.
Are the margin increases PP producers are trying to gain over monomer justified? Propylene monomer seems to be trending up 2 cpp over oil in cpp over past four years. Why is that? Can you describe the margin trend in propylene monomer in 2008? Do the integrated PP producers have an advantage in this market?
It will be interesting to see if buyers are willing to absorb the “surcharges” and other efforts to add to margin. I think buyers are willing to take increases based on feedstocks, but additional price hikes are tougher to pass through. That having been said, costs are increasing in other areas besides feedstock, and they do have to recoup the cost. I suspect these added costs are where the real negotiating will take place. In a perfect world, feedstocks will drop and suppliers can slowly add to margin while dropping prices, making everyone happy.
How do higher prices for natural gas impact the cost of resins? I noticed that it was not mentioned in your presentation.
Feedstocks can be made from natural gas or crude oil. Resin in North America more often comes from natural gas. However, the price of natural gas has been dragged higher by crude oil prices. Think of it this way: If a store is easily selling cases of Coke for $5 a bottle, then Pepsi is going to price its product accordingly.
