In today's daily, we discuss methanol pricing and show that the arbitrage with Asia is now negative, based on the near-term increase in US spot pricing. As with polyethylene, the major exporters are more concerned about the export margin over their costs, versus the difference between spot prices in each region. Certainly, where they have flexibility some US producers will try to divert methanol to the domestic market, but likely not at the expense of important export relationships and contractual obligations.
Source: Bloomberg, C-MACC, March 2021
On the theme of “never let a good crisis go to waste,” we see announcements for much higher polyethylene and polypropylene contract prices for the US for April. Today the tightness in the US and the spot markets are certainly supportive of a further increase, but prices are getting very high on a historical basis, and we would expect to see imports of polymers into the US to continue and possibly increase given the higher prices. We will also see further demand for what are limited volumes of recycled material, and some lower quality material may find its way into the mix over the next couple of months as buyers look to cut corners – this is highly unlikely in food packaging but perhaps not in other uses.
It is not just the polymer producers raising prices and with a handful of exceptions (mostly focused on polyester) the broader market is tight. We still believe that the collapse in US propylene pricing is a short-term timing issue around restarts after the storm – propylene derivative markets remain very strong.
