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  Past Reports
Weekly Market Update
Market Update
August 19, 2016


The spot resin markets were extremely active this past week - transacted volumes were strong and exceeded the entire first half of the month. Multiple deals were done across each of the PE and PP commodity groups and we would have traded more LDPE and LLDPE film grades if better priced material was available. Prices for most commodity grade materials moved higher, subtle increases are easily taken in the spot market, but quick and large jumps like $.03-.05/lb create sticker shock. The surge in business was at least partly spurred by the accelerated rally in the energy and monomer markets. Higher energy and feedstock costs are seen as supportive to the September price increases nominated for both Polyethylene and Polypropylene.

WTI Crude Oil prices continued to rise in its 3rd consecutive weekly gain. October, the new front month futures contract, added nearly $4/bbl to $49.11/bbl. Oct Natural Gas was up during the week, but gave back all of the gains on Friday, ending at $2.619/mmBtu, a fractional net loss. Spot Ethylene soared amid additional cracker disruptions, rising almost $.03/lb to eclipse $.35/lb, the highest price since July 2015. Spot PGP also advanced again, having leapt $.04/lb, to nearly $.40/lb, the highest level since May 2015.

Spot Polyethylene trading was very busy; the flow of well-priced resin offers was quickly matched off to willing buyers. PE prices continued to rise across the board, with the largest gain of $.02/lb seen for LDPE film. Domestic PE purchases in July were about 2% below the trailing 12-month average, and with the September $.05/lb price increase becoming ever more likely, processors have gotten more aggressive with their buying during August.

Mother Nature has recently aided spot demand creating the need for last minute material, as floods in the Gulf and fires out West have backed up shipments and deliveries. We are entering the historically more intense period of Hurricane season, and while thankfully, the Gulf has been spared in recent years, it is a good reminder to keep ample resin stocks on hand. Resellers have also actively been buying material; it appears that in addition to extra purchases ahead of the Sept increase, some are still caught a bit short of material, having counted on better availability which has not materialized.

Although industry supply figures suggest that spot resin should be more available, some upstream inventories have been held back to satisfy direct orders during current and upcoming maintenance periods. It is possible that if plant work is completed timely, material availability could improve in the later part of September, though added delays or further disruptions (crackers included) could keep the Polyethylene market snugly supplied. We are becoming ever more bullish on the upcoming September price increase.

Spot Polypropylene trading was strong and prices were mixed; CoPP advanced another half-cent, but HoPP, which had gotten slightly ahead of itself, slipped back the same. While processor demand continues to improve as buyers take advantage of PP prices still in the $.40s/lb, the market has yet to fully clear the surplus supplies still hanging around. Nonetheless, August PGP monomer contracts settled up $.035/lb to $.37/lb, which will translate into a cost push price increase. Some buyers still tied directly to a monomer component will see a jump this month, others will wait until September for the $.04/lb increase.

Although it took a while for PP producers to re-open their export channels, resin has recently been flowing offshore in sizable volumes. July exports of 135 million lbs represented a significant 9% of total sales and were more than 100 million more than in April 2016. So while domestic purchases were off nearly 100 million lbs in July, the resin was essentially placed elsewhere rather than accumulate upstream. We do not view low short-term domestic purchase volumes as a lack of demand, but rather as material that needs to be bought in the future. Do note though that a still unknown, but likely declining percentage of domestic PP demand was satisfied by imported resin in July.

We are getting more bullish on PP pricing. We can already feel the supply/demand balance turning tighter and rapidly escalating monomer costs, which have crimped Polypropylene margins, should temper operating rates. While trader supplies have been thinning and prices edging higher, with some deft searches, there are still some great deals to be had.

Total Offers 14,468,676 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
PP Homo2,790,208$.480$.570$.460$.500
PP Copo2,596,392$.500$.570$.490$.530
HDPE - Inj2,363,588$.500$.575$.505$.545
LLDPE - Film2,148,692$.535$.640$.550$.590
HMWPE - Film1,332,208$.550$.600$.530$.570
LDPE - Inj1,143,196$.590$.660$.600$.640
HDPE - Blow Mold1,085,472$.530$.565$.520$.560
LLDPE - Inj644,644$.560$.665$.590$.630
LDPE - Film364,276$.610$.700$.630$.670
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