AmericAs ChemiCals OutlOOk 2019 - Amazon S3 · US chemicals outlook US economic outlook US mergers...

AmericAsChemiCalsOutlOOk

2019

Key markets covered:

alcoholsaromaticsBase Oils

FertilizersintermediatesOleochemicals/surfactants

Plastics/Polymerssolventsand so much more...

Acids

Acetic Acid

Alcohols

Ethanol

Methanol

Oxo-alcohols

Aromatics & Derivatives

Benzene

Paraxylene (PX)

Styrene

Toluene/Xylenes

Base Oils

Base Oils

Chlor-alkalis

Caustic Soda

Caustic Soda Latin America

Ethylene Dichloride (EDC)

Hydrochloric Acid (HCI)

Vinyl Chloride Monomer (VCM)

Fertilizer

Nitrogen

Phosphates

Potash

Sulphur

Sulphuric Acid

Fibre Chain

Ethylene Glycol (EG)

Intermediates

Acrylonitrile

Butanediol (BDO)

Epoxy Resins

Maleic Anhydride

Melamine

Methyl Methacrylate (MMA)

Monopropylene Glycol (MPG)/Propylene Oxide (PO)

Soda Ash

Titanium Dioxide (TiO2)

Vinyl Acetate Monomer (VAM)

Olefins

Butadiene (BD)

Ethylene

Propylene

Oleochemicals & Surfactants

Biodiesel

Fatty Alcohols

Glycerine

Petroleum

Crude

Gasoline

Phenolics

Acetone

Phenol

Plastics/Polymers

Acrylonitrile-Butadiene-Styrene (ABS)/Polycarbonate (PC)

Nylon

Plasticizers/Phthalic Anhydride (PA)/Orthoxylene (OX)

Polyethylene Terephthalate (PET)

Polyethylene Terephthalate (PET) Latin America

Polyethylene (PE)

Polyethylene (PE) Latin America

Polypropylene (PP)

Polypropylene (PP) Latin America

Polyvinyl Chloride (PVC)

Polyvinyl Chloride (PVC) Latin America

Polystyrene (PS)/Expandable Polystyrene (EPS)

Polyurethane Chain

Isocyanates (MDI/TDI)

Polyols

Rubber

Styrene Butadiene Rubebr (SBR)

Solvents

Acrylates

Isopropanol (IPA)/Methyl Ethyl Ketone (MEK)

Other

Latin America economy and politics

US chemical firms performance

US chemicals outlook

US economic outlook

US mergers and acquisitions (M&A)

US plant projects

US trade (NAFTA, China)

Shipping

AMERICASCHEMICALSOUTLOOK

2019

Key markets covered:

AlcoholsAromaticsBase Oils

Chlor-AlkaliIntermediatesOleochemicals & Surfactants

OlefinsPlastic/PolymersAnd so much more...

contents

Copyright 2019 Reed Business Information Ltd. ICIS is a member of RBI and is part of RELX Group plc. ICIS accepts no liability for commercial decisions based on this content.

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Acids Acetic Acid

US acetic acid headed toward record new year

US acetic acid (AA) is pointed toward a record 2019, with new capacity possibly coming on line in Texas and export prices currently headed toward a multi- year low.

Celanese should set one record, though it may have to wait a year. The US-based producer plans to add the first new capacity in decades at its huge Clear Lake, Texas plant, with the expansion of 140,000 tonnes/year capacity at its 1.5m tonne/year AA unit there, which is the largest in the US.

In announcing the project, Celanese did not specify when the work would start, stating only that it would be done by the end of 2020.

In December, Celanese finished a similar-sized expansion of its vinyl acetate monomer (VAM) plant at Clear Lake, adding 150,000 tonnes of new capacity.

A US buyer questioned the need for new AA capacity, considering that the price drops in the second half of 2018, with all US units up and running at the end of the year.

“I don’t see any need for expansions unless there is going to be more consumption,” the buyer said. “Having too much product with the same demand? We will see.”

Celanese chief executive Mark Rohr took a different view in his last earnings conference call of 2018, saying the acetyls market is about to hit an extended up-cycle.

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supply & demAnd dAtAbAse Receive end-to-end perspectives across the global petrochemical supply chain for over 100 petrochemical commodities, across 160 countries, with historical and projections from 1978 to 2040. The database enables you to:

• Put the local or regional scenario in a global context to support your planning

• Validate commercial and growth strategies

ICIS offers a unique combination of analytics tools, pricing data and market information for over 180 commodities, across all key regions, designed to help you navigate and optimise opportunities in an ever-changing market, making complex analytics simple for you to:

• Spot opportunities, minimise risk and pre-empt competition

• Shape future strategies and expand your opportunities

• Maintain a competitive advantage and negotiate better prices with other market players

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pricinG And AnAlytics sOlutiOns

by lAne Kelley JAnuAry 2019

https://www.icis.com/explore/enquiry-petrochemicals-analytics-tools/?channel=chemicals&commodity=acetic_acid/?cmpid=ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_p&as&sfid=7012X000001WQuKhttps://www.icis.com/explore/services/analytics/supply-demand-data/?cmpid=ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_s&ddatabase&sfid=7012X000001WQuZhttps://www.icis.com/explore/contact/request-free-trial-icis-news/?cmpid= ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_news&sfid=7012X000001WQuUhttps://www.icis.com/explore/services/specialist-services/?cmpid= ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_specialistservices&sfid=7012X000001WQuP



Rohr said the proverbial 100-year storm – such as Hurricane Harvey in 2017 - tends to happen every 3-5 years in the global acetyls market.

“So we think we’re in a period where the business is going to be tight,” Rohr said.

The Celanese chief spoke about acetyls in general, but his

comments also fit the pattern of acetic acid export prices over the past decade.

In the following 10-year chart, AA prices look like an awkward W, with the middle section extending 8 ½ years and the peaks on each side separated by a decade.

AA prices deviated by less than $200/tonne for more than eight years before breaking out in late 2017-early 2018, prompted by a hurricane in Texas and a plant explosion in Tennessee. Prices jumped near a 10-year high in mid-2018 before falling back inside the previous range.

Rohr called the new US acetyls capacity being added at Clear Lake a “slight incremental expansion” that would not have much impact, if any, on the tight global market. Demand could creep up a little, he added, but Rohr predicted “upside potential” for Celanese in tight market conditions.

“We see ourselves moving from one dip that lasted a long time to one up-cycle that’s going to last a very long time,” Rohr added.

USD/tonne

US ACETIC ACID PRICE HISTORY

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Acetic Acid FOB US Assessment Export Spot 2-6 Weeks Full Market Range (Mid)

Source: ICIS



Alcohols EthAnol

US fUel ethanol mUSt retUrn to balance

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Industry nEws Our extensive global network of local experts report breaking news stories, covering chemical markets and events influencing commodity prices and affecting your daily business decisions. Stay fully informed and support your planning with:


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prIcInG And AnAlytIcs solutIons

With US fuel production margins under pressure due to record low pricing in the fuel sector over 2017, ethanol supply must return to balance. Additionally, shifting dynamics from the regulatory side combined with the tariff dispute with China will continue to paint a strong headwind for the US fuel ethanol market. However, increasing demand for high-octane gasoline components will continue to make fuel ethanol a desired commodity.

According to the US Energy Information Administration (EIA), ethanol production and inventories were at all-time highs. This led to downward price pressure, but the market could have found a floor.

Producers in the Midwest will be forced to decrease operational levels, much of whom have already done so,

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Ethanol Fuel: Anhydrous FOB Chicago Assessment Spot 14 Days Full Market …

US ethanol PrIce hIStorY

Source: ICISEthanol Fuel: Anhydrous FOB Chicago Assessment Spot 14 Days Full Market Range (Mid)

by stEvEn mcGInn JAnuAry 2019

https://www.icis.com/explore/enquiry-petrochemicals-analytics-tools/?chan nel=chemicals&commodity=ethanol/?cmpid=ILC|CHEM|CHCOM-2019-01- US-americasoutlooksmagazine2018_p&as&sfid=7012X000001WQuKhttps://www.icis.com/explore/services/analytics/supply-demand-data/?cmpid=ILC|CHEM|CHCOM-2019-01-EuropeGlobalOutlooks_sddatabase&sfid=7012X000001WQaPhttps://www.icis.com/explore/contact/request-free-trial-icis-news/?cmpid=%20ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_news&sfid=7012X000001WQuUhttps://www.icis.com/explore/services/specialist-services/?cmpid=%20ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_specialistservices&sfid=7012X000001WQuP



The following table shows the blending volumes for the various classes of biofuels. The category for renewable fuels includes both conventional ethanol and advanced biofuels.

The blending volumes are mandated under the renewable fuel standard (RFS).

Congressional leaders are weighing the future of the Renewable Fuel Standard (RFS), with some groups calling for its sunset but others propose strengthening the RFS.

Oil industry groups, unwilling to further see market share dissipate due to regulations, are joining with the auto industry to push forward a national octane standard.

Because of the potential for an octane standard, ethanol has a light at the end of the tunnel as automakers are making smaller, higher-compression engines that demand higher octane.

but due to risk of damage to pipes and other equipment, will not entirely shut plants down, leading to continued production. Producers must weigh which plants have access to cheapest feedstock and how to throttle back those with higher corn feeds.

Farmers are also weighing options with storage of corn harvests, as holding onto the grains and feeds for the higher price down the curve, with the contango in the corn futures market as more attractive than offloading to the fuel plant.

The US tariff dispute with China will continue to weigh down the market, as China’s biofuel blending plan was a potential outlet for excess US supply. Exports, however, have halted and US fuel ethanol sellers are keen to reinvigorate that market if the Trump administration ever smooths out the trade clash with Beijing.

On the regulation front, the approval of year-round 15% ethanol (E15) blends into gasoline appears, on paper, while bullish for demand, this has yet to be a proven panacea for plateauing domestic motor gasoline demand.

Much of the E15 plan depends on the speed at which blenders and distributors can blend higher amounts of ethanol into gasoline, but this is countered by automobiles not designed for higher blends and the risks to engines ethanol can pose.

blenDInG VolUmeS for bIofUelS 2017 2018 2019 2020

cellulosic biofuel (m gal) 311 288 418 n/a

biomass-based diesel (bn gal) 2.0 2.1 2.1 2.43

advanced biofuel (bn gal) 4.28 4.29 4.92 n/a

renewable fuel (bn gal) 19.28 19.29 19.92 n/aSource: EPA



Alcohols MethAnol

Two new meThanol uniTs sTarTing in The americas

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prIcInG And AnAlytIcs solutIons

Two new methanol plants are scheduled to start up in 2019 in the Americas, one in the US and the other in Trinidad and Tobago.

The largest methanol project, Caribbean Gas Chemical’s 1m tonne/year plant in Trinidad and Tobago, could start up as early as mid-2019.

Whether the new project will avoid Trinidad’s long-standing natural gas supply problems that have plagued petrochemical producers, it is unknown, though the owners of the project see a distinct advantage.

Mitsubishi is a major player in the Trinidad plant at La Brea, which is 470 miles from Jose, Venezuela, where the Japanese giant operates two Metor methanol plants.

Aside from Venezuela’s current economic catastrophe in progress, another disadvantage to having plants in the South American country (according to a source close to the project) is that methanol shipped from there to the US is not duty-free.

Methanol from Trinidad comes into the US duty-free while shipments from Venezuela are hit with a 5.5% import tax.

Small wonder, then, that Trinidad usually provides a much larger share of US imports than Venezuela. In 2017, Trinidad accounted for 49% of all US imports and Venezuela 23%, according to trade data. In October, Trinidad accounted for 57% of US imports and Venezuela 19%.

by lAne Kelley JAnuAry 2019

https://www.icis.com/explore/enquiry-petrochemicals-analytics-tools/?chan nel=chemicals&commodity=methanol/?cmpid=ILC|CHEM|CHCOM-2019-01 -US-americasoutlooksmagazine2018_p&as&sfid=7012X000001WQuKhttps://www.icis.com/explore/services/analytics/supply-demand-data/?cmpid=ILC|CHEM|CHCOM-2019-01-EuropeGlobalOutlooks_sddatabase&sfid=7012X000001WQaPhttps://www.icis.com/explore/contact/request-free-trial-icis-news/?cmpid=%20ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_news&sfid=7012X000001WQuUhttps://www.icis.com/explore/services/specialist-services/?cmpid=%20ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_specialistservices&sfid=7012X000001WQuP



Yet the US is not really the main target destination of the new Trinidad plant. A big target is Japan, which depends entirely on imports for its methanol. The source close to the project said some portion of the Trinidad plant’s methanol would of course be shipped to Asia, “but it will do for the US and EU as well”.

Another new methanol project expected to start up next year is US Methanol’s 200,000 tonne/year Liberty One unit at Charleston, West Virginia, which the company says

should operate in late 2019 because of a year-long delay related to a compressor malfunction.

The company is pitching the plant’s product as “made-in-the-USA methanol,” though a small irony of the project is that the plant itself comes from Brazil and the company is owned by European oil and gas investors.

Like Methanex, US Methanol is shipping a foreign plant to the US, and also like Methanex the original site is in South America. US Methanol shipped Liberty One from Rio de Janeiro.

Methanex’s two plants in Louisiana that started up in 2015 were shipped from the company’s complex in Punta Arenas, Chile.

Methanex could also have some new-plant news in 2019, with a final investment decision on its proposed third plant in Geismar, Louisiana expected by mid-year. Methanex has acquired land for a third methanol plant in Geismar, next to its two existing 1m tonne/year methanol plants.

The proposed new Methanex plant would be a new-build unit with a capacity of 1.8m tonnnes/year, the same size as the new OCI Natgasoline plant in Texas.

Source: ICIS

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US METHANOL PRICE HISTORY

Methanol FOB US Assessment Barges Spot Full Market Range (Mid)Methanol FOB USG Contract Price Assessment Barges Contract MonthContract Survey (Mid)

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Heightened demand next spring – some of it pent up, stemming from wildfires in California and several hurricanes in 2018 – is likely, especially with expectations of a mild winter.

The National Oceanic and Atmospheric Administration’s

Alcohols oxo-Alcohols

US H1 oxo-alcoHolS demand anticipated Strong amid Softer pricing


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priciNG AND ANAlYtics solUtioNs

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US n-bUtanol price HiStory

Source: ICIS

N-Butanol DEL US Contract Price Assessment Contract Month Contract Survey(Mid)

US oxo-alcohols demand is expected to be resurgent beginning in the first quarter, but buyers and sellers say the outlook beyond solid buying interest is less certain.

At the very end of 2018, demand and prices were poised to fall precipitously, mostly on seasonality and weaker November propylene. Downward pressure on December propylene, is likely to push January 2019 oxo-alcohols prices sharply lower as well.

Market participants, however, attribute broader softness to uncertainties surrounding US/China tariffs, which are beginning to disrupt trade flows.

“Regions we have not typically seen as interested to supply are now reaching out to gauge our interest,” a buyer said. “I can only assume this is due to material flowing from China into their region.”

Also different, the buyer said, is that US producers that do not typically supply him product are aggressively soliciting his business.

BY lArrY terrY JANUArY 2019

https://www.icis.com/explore/enquiry-petrochemicals-analytics-tools/?channel=chemicals&commodity=oxo-alcohols/?cmpid=ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_p&as&sfid=7012X000001WQuKhttps://www.icis.com/explore/services/specialist-services/?cmpid=%20ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_specialistservices&sfid=7012X000001WQuP



(NOAA) Climate-Prediction Center has forecast above-average winter temperatures through February across the northern and western US, Alaska and Hawaii.

While intermediates such as oxo-alcohols and acrylates should see buying interest escalate from the architectural coatings markets, as well as from adhesives used in construction, volume-growth projections for 2019 from a couple of paint and coatings makers are moderate.

For the foreseeable future, domestic petrochemical markets will continue to experience transportation constraints as trucking shortages strain raw material and finished-product deliveries.

A buyer said he does not expect that to affect demand significantly, but added that “companies are mostly just adjusting to the new state of the industry.”

It is not yet clear whether constraints on the oxo-alcohols and derivative acrylates markets in late 2018 will heighten European demand for US imports. Demand for 2-EH used in paints and coatings typically peaks by

the second quarter.

In the downstream plasticizers market, logistics issues will continue to exert additional pressure well into 2019. In these markets as well, European production issues may reduce supply, and Chinese tariffs will continue to weigh on the market.

Upstream propylene demand is likely to strengthen in the first quarter of 2019, but inventories may continue stable to elevated on strong production from refineries and crackers.

NBA is used as a solvent and to produce butyl acrylates for the coatings and adhesives industries. Smaller-volume uses are in acetate and glycol ether formulations.

Among the major uses for 2 ethylhexanol (2-EH) are as a feedstock for chemicals used in the production of paint, automobiles, adhesives and plasticizers, and in building and construction markets.

US oxo-alcohols producers include BASF, Dow Chemical, Eastman Chemical and Oxea.



AromAtics & DerivAtivesbenzene

US benzene oUtlook beariSh on SUpply length

US benzene prices are likely to remain under downward pressure during the early months of 2019, as the length in supply that has characterised much of 2018 is expected to remain in place in 2019.

US refinery operating rates are anticipated to remain high to fuel strong demand for US fuel exports, particularly from Mexico. Refiners will also keep rates high in anticipation of healthier demand for diesel as shippers prepare for the International Maritime Organization’s (IMO) 2020 regulations for bunker fuels, which will require ship operators to shift to fuels with much lower sulphur content than currently allowed.

Refineries produce benzene as a by-product of gasoline

production and account for around 60% of US benzene production.

Steam crackers are another key source of benzene production, accounting for around 20% of total US production. The US is in the midst of a large wave of new steam cracker builds, with around 5m tonnes/year of new ethylene capacity expected to come on line in 2019.

New US steam crackers are mostly designed to use light feedstocks such as ethane. Using light feedstock causes a significant drop-off in production of benzene and other aromatics as co-products per unit of ethylene produced. Benzene supplies will nevertheless expand with the large volume of new ethylene capacity coming on line.

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supply & DemAnD DAtAbAse Receive end-to-end perspectives across the global petrochemical supply chain for over 100 petrochemical commodities, across 160 countries, with historical and projections from 1978 to 2040. The database enables you to:









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pricinG AnD AnAlytics solutions

by zAchAry moore JAnuAry 2019

https://www.icis.com/explore/enquiry-petrochemicals-analytics-tools/?channel=chemicals&commodity=benzene/?cmpid=ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_p&as&sfid=7012X000001WQuKhttps://www.icis.com/explore/services/analytics/supply-demand-data/?cmpid=ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_s&ddatabase&sfid=7012X000001WQuZhttps://www.icis.com/explore/contact/request-free-trial-icis-news/?cmpid= ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_news&sfid=7012X000001WQuUhttps://www.icis.com/explore/services/specialist-services/?cmpid= ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_specialistservices&sfid=7012X000001WQuP



Major benzene derivatives include styrene, phenol, nylon and methyl di-p phenylene isocyanate (MDI).

In addition to rising domestic supplies, anticipated length in the Asian benzene market will also ensure longer supplies in the US.

The US benzene market is structurally short and dependent on imports to meet demand. Much imported product comes from Asia, especially South Korea.

Asian markets are expecting longer supplies in 2019, as the region is adding benzene capacity at a faster rate than downstream derivative capacities are coming on line to consume the incremental benzene supplies.

Demand is not expected to rise quickly enough to absorb the new production coming into the market. The US benzene market is considered mature and benzene demand is anticipated to grow at modest rates over the next several years.

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US benzene priCe hiStory

Benzene DDP USG Assessment Spot Current Month Full Market Range (Mid)

Benzene FOB USG Contract Price Assessment Contract Month Contract Survey (Mid)

Source: ICIS



Asian paraxylene (PX) trade to the US is likely to increase in 2019 amid shifting production levels in both regions.

Supply is expected to tighten in the first quarter amid refinery maintenance season, putting upward pressure on prices in early 2019.

However, the most significant impact on US supply will be the closing of Chevron Phillips Chemical’s PX plant in Pascagoula, Mississippi.

The company announced the plans to close the plant, which is the company’s only PX unit, in early December and plans to leave the business by the end of 2018.

The company said it is leaving the business because it is not material to the company’s financial results.

Although the plant has a capacity of 495,000 tonnes/year, representing over 10% of North American capacity, the plant only represents approximately 1% of total capacity in the global market.

The PX produced by the plant was used primarily in

AromAtics & DerivAtivesPArAxylene (Px)

AsiAn PX trAde to Us likely to increAse Amid shifting ProdUction

By lucAs HAll JAnuAry 2019

the production of polyester in swimsuits and high-performance athletic wear in a domestic market increasingly moving toward the production of polyethylene terephthalate (PET).

The closure of CP Chem’s PX plant provides opportunities for Asia to export their PX volume, especially on the back of PX capacity expansions within Asia.

In 2017, South Korea exported a total of around 114,000 tonnes, up 11.8% compared to the previous year, according to customs data.

From January 2018 to October 2018, South Korea has

Us PX PlAnts

company sitecapacity

(‘000 tonnes)

exxonmobilBaytown, TX 545

Beaumont, TX 275

flint hills resources Corpus Christi, TX 590

indorama Ventures Decatur, AL 1,000

BP chemicals Texas City, TX 1,200

chevron Phillips chemical Pascagoula, MS 495



exported around 103,000 tonnes to the US, according to the same data.

Moreover, there are two new mega refinery-based PX projects in China that are scheduled for startup in 2019, adding a total of around 8.5m tonnes/year of new PX supply.

Along with increased PX capacity in the global market comes increased demand for purified terephthalic acid (PTA) demand for use in the polyester fibres and PET markets, particularly in Asia.

The US is likely to become increasingly dependent on imports from Asia in order to produce PTA amid the recently lost capacity as well as no new plans to expand production in the domestic market.

This is likely to put upward pressure on US PX prices in 2019.

One variable will be the price of crude and naphtha values in the global market. Higher prices are expected to add to upward volatility, while lower prices could moderate pricing throughout the year.

PX is used to produce PTA, which is an intermediate in the production of PET. Major producers of US PX are BP, Chevron Phillips Chemical, ExxonMobil, Flint Hills Resources and Indorama.

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Us PX Price history

Source: ICIS

Paraxylene FOB US Assessment Export Spot 4 Weeks Full Market Range (Mid): USD/tonne

Paraxylene FOB USG Assessment Spot 4-6 Weeks Full Market Range (Mid): USD/tonne

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Paraxylene FOB US Assessment Export Spot 4 Weeks Full Market Range (Mid)

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By DaviD Love january 2019

aromatics & Derivativesstyrene

US Styrene priceS to peak in Q1 amid tUrnaroUndS

Prices in the US styrene market are poised to peak in the first quarter as two plants are expected to begin turnarounds before the end of March.

One turnaround is slated to begin at the end of January, and the other in March.

The US turnarounds also coincide with a busy Q1 turnaround season in China, as four plants will still be conducting turnarounds when 2019 begins.

As was the case the last two years, after peaking in the first quarter, US styrene prices should weaken from May through August before hitting a second, smaller peak in the autumn.

The second peak will largely be the result of additional turnarounds in key markets.

The global styrene market will continue to be impacted by the US-China trade war, and China’s antidumping duty (ADD) against the US, South Korea and Taiwan, which was finalised in June.

On 15 June, China said it would impose a 25% tariff on $50bn of US imports in retaliation for US President Donald Trump’s administration moving forward with US tariffs.

China’s Finance Ministry listed a second set of US exports

valued at $16bn, which included a wide variety of US chemical and energy products, including styrene.

Styrene downstream products are included in US tariffs against China, including polystyrene, expandable polystyrene, styrene-acrylonitrile and acrylonitrile-butadiene-styrene.

China’s ADD ruling against the US, South Korea and Taiwan led to reduced exports from the US to China during 2017 and 2018. Exports during the first nine months of this year at 113,966 tonnes were down by 30% year on year.

However, China is net short on ethylene and has to import styrene in order to meet domestic demand. Much of China’s current styrene imports are being met by suppliers in the Middle East, as trade routes changed following China’s ADD.

Large volumes of Middle Eastern supply previously moved to Europe, which left Europe in a short position at various times in 2018. As a result, US suppliers have increased sales to countries like the Netherlands and Turkey this year.

US benzene spot prices began dropping in early October

US CTS/Ib USD/US gal

US STYRENE PRICE HISTORY

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Benzene DDP USG Assessment Spot Current…(Mid)

Styrene FOB US Assessment Export Spot 4-6 Weeks...(Mid)

Source: ICIS



on oversupply and falling prices in other regions. ICIS benzene spot prices fell by 36% from 5 October through 7 December. ICIS styrene spot prices followed suit, falling by 27% from 12 October through 30 November, before firming slightly the first week of December.

North American styrene producers include AmSty, INEOS Styrolution, LyondellBasell Chemical, Pemex, Shell Chemicals Canada, Total Petrochemicals and Westlake Styrene.

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Source: US International Trade Commission

0

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US STYRENE EXPORTS, IMPORTS FROM 2013

ExportsImports

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By Lucas HaLL januaRy 2019

aRomatics & DeRivativestoLuene/XyLenes

US likely to become dependent on tolUene, mX importS

US toluene and mixed xylenes (MX) supply and demand fundamentals are expected to remain largely stable in 2019 as the market continues to track volatility in crude oil pricing and moderate growth in octane demand for the gasoline-blending pool amid growth in the gasoline export market.

Sustained growth in octane demand is likely to increase demand for toluene and MX imports looking forward.

Demand is expected to begin picking up early into the first quarter as refineries build up inventories in preparation for the switch to summer-blend gasoline ahead of the summer driving season, which occurs from April to mid-September.

Gasoline production has outpaced demand and driven inventory levels well above normal, drastically cutting into margins. However, strong growth in distillate demand has driven diesel prices higher, offsetting poor gasoline margins and sustaining growth in gasoline production.

US refineries are primarily tooled to maximise gasoline production but because refiners must produce gasoline in order to get diesel fuel, gasoline production will remain robust through 2019.

With flattening year-on-year growth in gasoline consumption in the US, US refiners have to look to international shores to find growing demand.

The Mexico market will continue to be a growing destination for US-produced gasoline, heightened by slackening refined fuels production combined with rising demand growth from the Mexican people. Despite ambitions by the country’s newly elected president to boost domestic oil output and curb fuel imports from the US, Mexico will remain an increasingly important destination for US refiners.

Accordingly, consumers of toluene and MX in the US chemical sector will increasingly have to look elsewhere to satisfy demand as more octane is reserved for use in the gasoline-blending pool.

Imports of toluene and MX are likely to increase amid less availability in the US spot market, putting upward pressure on the market.

Stable-to-slack demand in downstream markets could counteract these pressures so long as no unforeseen production disruptions hit the market.

Demand for toluene for on-purpose benzene production is likely to remain weak, at least in early 2019, amid ample benzene supply and sluggish downstream styrene demand. Margins were largely squeezed throughout most of the year, with toluene often carrying a premium over US spot benzene prices.

North American toluene di-isocyanate (TDI) supply has been long through the second half of the year and no major change is anticipated in supply and demand balances in 2019. Some recent plant issues in Europe may help stabilise TDI availability at least through the early months of 2019.

Demand for MX for paraxylene (PX) production in the polyester chain remains mostly dependent on utilisation rates in Asia, where polyester production has decreased demand for US MX and PX in the global fibres market.

Chevron Phillips Chemical announced that it would shut

USD/US gal

US TOLUENE & XYLENES PRICE HISTORY

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Toluene C Grade FOB US Assessment Barges Spot 4-6 Weeks...(Mid)

Xylenes FOB USG Assessment Barges Spot 4 Weeks Full Mar...(Mid)

Source: ICIS



its sole PX unit, located at its Pascagoula, Mississippi, refinery at the end of December. While the unit has a capacity of 495,000 tonnes/year and represents about 10% of US capacity, it represents roughly only 1% of global capacity.

As such, the US is expected to remain increasingly dependent on imports to satisfy chemical demand for toluene and MX aromatics over 2019, with price fluctuations in Asia playing a greater role than in years past.

Even so, crude oil prices will remain the biggest influence on the US toluene and MX markets in 2019. Fluctuations in crude oil prices are expected to directly impact toluene and MX prices, with lower prices expected to exert major downward pressure and higher prices major upward pressure looking forward.

Major producers of US toluene include ExxonMobil, Marathon Petroleum, Flint Hills Resources, Valero, Total and CITGO.

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Base Oils Base Oils

Crude oil/MArPol stir uneAsy wAves for AMeriCAs bAse oils

Going into 2019, two items are stirring uneasy waves for the Americas base oil market: crude oil prices and the MARPOL (International Convention for the Prevention of Pollution from Ships) initiatives under the IMO (International Marine Organization) on new sulphur content guidelines for marine fuels.

A consequence of crude oil prices staying in the $50s/bbl along with deliberations within OPEC and the global oil-producing regions is above-average uncertainty about crude oil prices going into 2019. Those uncertainties are keeping a crunch on base oil prices that is unlikely to abate in the first quarter of the new year.

The following ICIS graph shows price direction for benchmark West Texas Intermediate (WTI) crude and for Louisiana Light Sweet (LLS) crude oil that closely mirrors Brent movements.

At the time of this writing, indications were that Saudi Arabia continues to work to convince Russia to take another round of supply cuts. Both countries hold different views about respective break-even costs. Iran appeared as a late-entry obstacle to any supply deal, as the sanction-hit country is claiming the right to an exemption because of its current circumstances. Additionally, the Saudi energy minister noted uncertainty that any deal can be concluded.

Part of the challenge facing base oil prices comes from the compression of the crude oil spike to about $75/bbl in October and the dive into the $50s/bbl across the span of the quarter.

In September/October when crude hit $75/bbl Americas base oil posted prices increased by about 25 cents/gal from most producers in each of the base oil groups.

By November/December, paraffinic posted prices had shed the 25 cents/gal and several producers, mostly Group I at the time of this writing, moved down another 15 cents/gal. The decreases were primarily driven by sinking crude oil prices that moved into the $50s/bbl and continued to bob around that mark.

These changes represented a 40 cent/gal reduction in base oil posted prices in less than three months.

With the coming holiday season keeping demand subdued, this put a bookend on the year with snarled crude oil prospects still hanging for the new year.

Naphthenic base oil prices were not immune to the effects of the crude oil plunge, snagged by lower prices in the paraffinic sector that encouraged buyers to expect lower prices in the pale oils as well, despite the fact that pale oils do not necessarily trend one-on-one with the paraffinics.

Driven by the crude oil dive and by seasonally slower demand in some of the viscosity grades, most naphthenic producers formally announced 20 cent/gal reductions on all viscosity grades with effective dates from late November to early December.

An exception is Cross Oil, which elected to reduce prices by 3-8% per gallon depending upon the viscosity grade, effective 10 December.

The second attention-grabbing item for base oils and industrial lubricants in 2019 will come into more focus as effects of the IMO initiative on sulphur content percent in marine fuels begin to emerge.

This initiative is set to become effective in 2020, making

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Crude LLS FIP St. James, LA Assessment Spot Month Closing Value (Mid)

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us bAse oils PriCe History

Source: ICIS

Crude LLS FIP St. James, LA Assessment Spot Month Closing Value (Mid) Crude WTI FIP Cushing, OK Assessment Spot Month +1 Closing Value (Mid)

By Judith taylOr January 2019



2019 the year for examination of what changes can actually take place, how to put these into place and what enforcement will look like.

MARPOL is the main international convention aimed at preventing pollution from ships caused by operational or accidental issues. It was adopted at the IMO in 1973, with the Protocol of 1978 being adopted in response to a number of tanker accidents in that decade.

On 1 January 2020 new global rules from the IMO through MARPOL will take effect and shipowners must cut sulphur emissions from 3.5% to 0.5% or less.

A low-sulphur cap under the MARPOL rule has already applied to areas known as Emission Control Areas (ECAs) in North America, the Baltic region and the North Sea.

Group I base oils are a major component of marine lubricants and market players are watching the IMO situation closely in order to gauge the likely effect.

In the IMO view, responsibility for monitoring compliance lies with states that are party to MARPOL’s Annex VI, which is a section of the US Environmental Protection Agency (EPA). States within this relation are viewed by the IMO as responsible for any fines or sanctions for non-compliance.

One Group I base oil producer said, “It is still undecided, lots of questions.”

From an Americas base oil perspective, that comment closely sums up the market and industry stance entering 2019.

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add to US supply. Other estimates say that the moves could cut 350,000 dmt in US exports for the year.

That would be a 10% decrease of the total 3.3m dmt of caustic shipped in 2017, according to data from the US International Trade Commission (ITC).

“It’s going to reverse that recent trend,” a representative of a major US chlor-alkali producer said.

That trend began in 2014, when US sales of export caustic to Australia stood at about 165,000 dmt.

But US caustic soda prices were atypically low across 2014 and 2015 and the buyers in Australia began to secure supply through contracts. Sellers in Asia typically avoid entering supply contracts in favour of spot sales, according to market sources.

So the US became a larger supplier to the region, finishing 2017 with just under 600,000 dmt in caustic sales to buyers in Australia, much of it through contracted transactions, but with some spot business – at very high prices after Hurricane Harvey passed through in August of 2017.

Some of the buyers are said to have been unhappy with

Chlor-alkalisCaustiC soda

US caUStic Soda SaleS to aUStralia will lower in 2019


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priCiNG aNd aNalYtiCs solutioNs

Over the past five years, alumina refiners in Australia have tripled their buying of US liquid caustic soda to become the second-largest consumer of US exports, after Brazil.

That change gave US chlor-alkali producers flexibility in their run rates for production of caustic soda, and its co-product, chlorine, and sent production of ethylene dichloride (EDC) higher. Higher EDC output had the added benefit of increasing spot export sales for that intermediate chemical to the production of polyvinyl chloride (PVC) as producers sought to rid themselves of the extra chlorine.

But that virtuous cycle, for US producers, at least, may be near an end and will likely play a role in US caustic soda spot export prices during the year.

The alumina industry caustic buyers in Australia have changed their supply plans for 2019, or at least some of those buyers have, and are switching sourcing to chlor-alkali production in Asia and the Middle East.

Estimates are that alumina producers Queensland Alumina, Rio Tinto and South32 will reduce their US caustic soda purchases of by 200,000 dry metric tonnes (dmt) or more in 2019, a sharp downturn that will likely

BY Bill BoweN JaNuarY 2019

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of 2018. That cut US exports by 25,000 dmt/month for the year and helped push US spot export prices down by almost $200/dmt.

So the situation in Australia is prompting US producers and traders to re-evaluate their 2019 plans for possible adjustments.

Global supply and demand for caustic soda will not change, producers hasten to point out. They say that whoever supplies Australia will have to bypass other buyers, which US producers will pick up.

But some of the new supply is likely to come from China, where domestic product may be freed up to meet new export demand, adding caustic to global markets rather than just redirecting it.

If US caustic soda producers have constrained sales, operating rates could lower and reduce the amount of EDC produced. EDC production gets a boost when producers have high margins for caustic because caustic production also produces chlorine.

Chlorine is dangerous and not easily stored. So the chlorine must be used. EDC has been the outlet of choice because it is safe to transport and ready demand awaits in both Asia and Europe.

“EDC business really picked up with high caustic prices,” one producer said. “But it will likely be quite different this year.”

Major US producers of caustic soda include Olin, Occidental Chemical, Westlake Chemical, Shintech and Formosa Plastics.

the higher prices during 2017 and most of 2018 and are seeking more affordable and ready supply.

But an improvement in bauxite supply, a grade of the mineral in the region that requires less processing to refine it into alumina, has also reduced the volume of caustic soda needed to process the same amount of alumina.

Additionally, the supply of caustic soda from Asia and the Middle East is expected to show more consistent availability than in the past couple of years, as well.

Caustic is used to separate alumina from the reddish dirt-like bauxite mineral. The alumina, a white powder, is then smelted to make aluminium, a lightweight metal used in autos, finer machinery, aircraft and other high-value products.

Alumina processing is one of the top three demand sectors for caustic soda and global aluminium demand is growing as “light-weighting,” the process of getting rid of weight to improve fuel efficiency, becomes a goal of auto and aircraft manufacturers.

The growing demand for alumina is one reason US caustic exports have risen consistently in recent years, along with improved demand from pulp and paper refiners and for chemical processing and refining in the US Gulf.

But such a large demand sector can also create problems. Alumina complications have played havoc with US producers plans in 2018.

Alunorte in northern Brazil is the largest alumina refiner outside of China and the largest single buyer of US caustic soda, was forced to reduce production by half in March

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Caustic Soda Liquid FOB USG Net Contract Month Contract Survey(Mid)(USD/dst)

Caustic Soda Liquid FOB USG Assessment Export Spot 4-6 Weeks Full...(Mid)(USD/dmt)



Chlor-alkalis latin ameriCa CaustiC soda

Latin america caustic soda continues to face downward pressure

The caustic soda market in Latin America, as well as in North America and other regions, will continue to face downward pricing pressure in the first quarter of 2019 as a result of ongoing production curtailment at Brazil’s alumina refiner Alunorte, which is critical to the caustic soda supply-demand balance.

Economic and political issues in several countries in the region will additionally contribute to a cautious outlook for the first quarter of 2019 in Latin America caustic soda markets.

Norsk Hydro’s Alunorte in Barcarena, Para state in northern Brazil, is the world’s largest alumina refinery, and the single largest consumer of US liquid caustic soda. Under full operation, it consumes more than 600,000 dry metric tonnes (dmt) of caustic soda annually from US producers exclusively, but it is currently operating at a 50% rate. Alunorte has around 2,000 direct employees and nameplate capacity of 6.3m tonnes/year. Hydro owns 92.1% of Alunorte, the company said.

On 16-17 February 2018, an extreme rainfall caused flooding in Barcarena, including the Alunorte alumina refinery. A rift with regulators began in February after the heavy rains were suspected to have caused an overflow of retainment ponds at the Alunorte site that was thought to have contaminated nearby water supplies. Internal and external reviews confirmed that there was no overflow from the bauxite residue deposits or harmful spills from the February rain event, Alunorte said.

Alunorte continues to produce alumina at a 50% production rate under instructions from regional and state authorities. According to a 7 November statement from Alunorte, a federal court in Belem, Para, declared its competence and ratified a previous decision from the Para state court.

No timeline has been set for Alunorte’s return to full production.

GDP growth projections are likely to reflect activity in different countries. Particularly strong growth is projected for Bolivia, Chile, Paraguay and Peru. Critical conditions are expected to continue in Venezuela, while Argentina’s recovery is expected to remain slow.

The International Monetary Fund (IMF) has published

GDP growth projections by country in its World Economic Outlook of October 2018. The following table shows GDP forecasts for the western hemisphere.

December caustic soda prices in Latin America declined because of decreasing demand in line with seasonality, fewer working days on the holidays, and inventory shaving to reduce tax exposure.

Demand in Latin America from major consuming industries such as alumina and soaps/detergents is gauged as stable to soft, although pulp/paper has been performing well.

Furthermore, general demand usually remains soft in South America after the new year until the Carnival holidays in early March. During this period, vacations tend to dampen business activity.

Demand in other regions also weakened in December for the same reasons.

By luly stephens & ron Coifman January 2019

Gdp Growthn in Latin america

real Gdp

projections

2017 2018 2019

north america

United States 2.2 2.9 2.5

Canada 3.0 2.1 2.0

Mexico 2.0 2.2 2.5

south america

Brazil 1.0 1.4 2.4

Argentina 2.9 -2.6 -1.6

Colombia 1.8 2.8 3.6

Venezuela -14.0 -18.0 -5.0

Chile 1.5 4.0 3.4

Peru 2.5 4.1 4.1

Ecuador 2.4 1.1 0.7

Bolivia 4.2 4.3 4.2

Uruguay 2.7 2.0 3.2

Paraguay 4.8 4.4 4.2

Latin american and the caribbean 1.3 1.2 2.2

Source: International Monetary Fund (IMF), World Economic Outlook, October 2018 (annual percentage change)



Business in Argentina and Brazil has remained below expectations for the past couple of years, as the two countries gradually recover from their respective recessions of 2016. Participants in both countries had initially anticipated speedier economic improvement.

This year, dampening the recovery in Argentina, the country experienced a major currency devaluation. Argentina’s currency market has recently shown more stability following the agreement on a $50bn credit line from the IMF. However, domestic prices for services and fuel have continued to rise, while the population’s purchasing power decreased, deepening the country’s recession.

In Argentina, low activity in general is expected in the next quarter, and possibly even the next two quarters, as a result of high interest rates, which are discouraging investment and consumption.

Demand in Venezuela is minimal. Imports are difficult, as foreign currency to pay for imports is not readily available. Some businesses started year-end vacations as early as mid-November, for the lack of activity.

Business usually slows in anticipation of an election, or until a president-elect takes office and new policies are established. Andres Manuel Lopez Obrador (AMLO) took office in Mexico on 1 December 2018, while Jair Bolsonaro took in Brazil on 1 January 2019. The policies the new presidents may follow once in office remain unclear, but both have promised to improve the economy. In Mexico, the announced cancellation of Mexico City’s airport construction has dampened market sentiment and driven the peso to weaken against the US dollar. Business participants protested AMLO’s decision to discontinue the

already started construction of the airport.

Although the Latin America caustic soda market is expected to remain soft through the first quarter of 2019, projections are mixed depending on economic and political conditions in each country. So far, the market remains oversupplied and buyers push for lower prices.

Argentina will be slow to heal from the economic vulnerabilities that surfaced in mid-2018. Brazil appears on a faster track to recovery after its recession of 2016. Brazil’s president Bolsonaro is considered business friendly, but industry participants have noted uncertainty about his intended policies. Venezuela’s economy remains in distress. The outlook for Colombia is stable, as is that for Mexico, although participants noted caution on the direction in which the populist president AMLO will lead the country.

Caustic soda producers in Latin America are Braskem, Mexichem, Quimpac and Unipar.


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300

400

500

600

700

800

900

1,000

Dec-2

018

USD/

dmt

Caustic Soda Ex-Tank Argentina Caustic Soda Ex-Tank Brazil

Caustic Soda Ex-Tank Mexico Caustic Soda Liquid FOB USG

Latin america caustic soda price history

Source: ICIS

Caustic Soda Ex-Tank ArgentinaCaustic Soda Ex-Tank Mexico

dec 2017 dec 2018

Caustic Soda Ex-Tank Brazil Caustic Soda Liquid FOB USG

https://www.icis.com/explore/enquiry-petrochemicals-analytics-tools/?channel=chemicals&commodity=caustic-soda_LA/?cmpid=ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_p&as&sfid=7012X000001WQuKhttps://www.icis.com/explore/services/specialist-services/?cmpid= ILC|CHEM|CHCOM-2019-01-US-americasoutlooksmagazine2018_specialistservices&sfid=7012X000001WQuP



Chlor-alkalisEthylEnE DiChloriDE

US EDC likEly to SEE grEatEr availability, rElativEly StablE priCing

US ethylene dichloride (EDC) prices will likely remain at their recent higher level during 2019 after more than tripling during the past 12 months.

Availability of the precursor chemical to vinyl chloride is likely to improve later in 2019 when a major buyer of US liquid caustic soda returns to full production in Brazil.

Also new for 2019: Two US producers will gain margin strength with the launch of operations of ethane crackers to make feedstock ethylene. It is not expected to make more EDC available to the market because the ethylene is expected to be used internally.

Shintech in Plaquemine, Louisiana, is expected to

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