The election of Donald Trump as US president was having minimal initial impact on domestic petrochemical markets Wednesday, but market sources said to watch potential policy changes after he takes office because of potential ramifications for the industry, particularly on trade agreements.
Crude futures rose slightly Wednesday after steep declines seen overnight as traders responded to Trump's victory, and the dollar rebounded after sharp initial declines.
A US olefins producer source said the petrochemical market is more stable than other commodities and will not see much reaction to Trump's election as president.
But moving forward, policy implications will be be watched closely, market sources said.
Related: Find more election coverage in our US Election 2016 news and analysis feature, which includes links to blog posts, podcasts, videos, special reports, news stories and more.
"I think there will be a positive impact short term, less [Environmental Protection Agency] regulations and better energy policies," a trading source said. "Possible negative longer-term issues with trade barriers as the petrochemical industry will need to export lots of material."
A polymer trading source said any changes to trade agreements could have a big impact on the market, but it will likely be a year or so before any true fallout or results are seen.
The North American Free Trade Agreement between the US, Canada and Mexico has been in place for more than two decades, but drew criticism from Trump during the election campaign and could be a potential target for renegotiation or even termination under his administration.
The US chemicals sector has reaped huge benefits from NAFTA, which slashed duties of 12%-20% on all imports of chemicals, petrochemicals and creams.
The Trans-Pacific Partnership signed in February with 11 other countries including Japan, Canada and Australia could also face a similar fate. Trump routinely criticized the deal during his campaign, and there has been growing belief that it would not be approved by Congress.
Key aromatics, benzene, toluene and mixed xylene markets Wednesday showed minimal reactions to Trump's election win. US benzene was being talked higher day on day, while toluene and mixed xylene talks are around the same. US spot benzene was being talked in the $2.26-$2.35/gal range on a DDP US Gulf Coast basis, US spot toluene was being talked in the $1.82-$1.95/gal range and US spot mixed xylene pricing was being bid around $1.96/gal, against no offers, according to market updates.
Sources attributed higher indications in the benzene market to the rebound in crude from earlier levels.
Movement in energy is an important factor for BTX markets as traders hedge deals against energy and because of ratios that provide "good" indicators on potential short term price movement, sources have said.
Ethylene prices were also seeing minimal changes, but have dropped 23% or 6.625 cents/lb since reaching 28.875 cents/lb FD USG on October 28, while propylene prices have dropped 16% or 6.25 cents/lb since reaching 38 cents/lb FD USG on October 26. Sources cite the drop in olefins to a combination of lower feedstock demand, end-of-year inventory management and upcoming startups.
Additional length in the market is attributed to three US Gulf Coast producers scheduled to have steam crackers restart in November after planned maintenance outages, with two of them heard to be already in process of doing so, sources said.
Polymer prices also were talked mostly stable to pricing seen over the past week.
