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  Past Reports
Weekly Market Update
Market Update
August 22, 2014


After a couple months of full-throttle trading, the spot resin market seemed to really hit the brakes. Consistently rising commodity resin prices have placed most spot materials well above contract levels, damaging discretionary demand. Transacted volumes finally fell below average this past week and prices managed steady. PGP contracts rose $.05/lb in August and most Polypropylene contracts are still tied to monomer. However, several producers are also looking to raise PP prices by an extra $.02-.04/lb, although the level of success is still to be determined. Polyethylene contracts are rolling flat this month, but producers should have little issue implementing their (mostly) $.03/lb increase nominated for September.

The major US energy markets settled the week in opposite directions. October rolled to the front month Crude Oil contract and traded in less than a $3/bbl range, settling Friday at $93.65/bbl. This week’s $1.67/bbl loss brought this Crude Oil futures contract to its lowest level since January. Natural Gas futures recovered a bit; September remained the most active month and ended the week at $3.84/mmBtu, a gain of $.064/mmBtu. Spot Ethane earned another fractional gain as it closes in on $.23/gal ($.097/lb). Spot Propane shed less than a cent to just under $1.02/gal ($.289/lb).

Spot Ethylene trading was fairly active, with numerous deals done in both prompt and deferred months. There are just two crackers still offline for scheduled maintenance. Ethylene for August delivery traded in a two-cent range, most recently transacting up $.015/lb to $.68/lb, the week’s high. The discount for forward months through Dec 2014 remained at $.04/lb; however, the curve for 2015 steepened. Ethylene prices drop about a penny per month on average to reach $.515/lb by December – a whopping $.165/lb below the prompt level.

Polyethylene trading activity slowed and prices were steady across the board. Buyers backed away since many spot PE grades rallied as much as $.07/lb over the past 7 weeks, going from discount to premium to contracts. Much of the gap should close in September as producers seek to raise those prices by $.03/lb. Spot conditions and supply side fundamentals certainly support the initiative. Preliminary reports show that in July, domestic PE demand was 160 million lbs more than the trailing 12 month average; at 2.74 billion lbs it equaled January, a level not eclipsed since Aug, 2012. PE exports ran at a healthy 639 million lbs, just above average. Continued production issues again limited reactor rates to less than 92%, so producers drew almost 200 million lbs of PE from their inventories to meet demand. August began with 3.16 billion lbs of Polyethylene on hand, about 150 million lbs below the trailing 12 month average.

There was very little spot Propylene trading, just a few transactions were seen spread among prompt and future deliveries. PGP for August and the next couple months spent the week in the vicinity of $.70/lb, transacting there for a marginal gain. Small discounts are provided for monomer at the end of this year. The week’s most exciting development was that August PGP contracts finally found settlement, which was uncharacteristically late in the month. Initial nominations were for a $.065/lb hike to $.74/lb, but as the spot market faded the increase reduced to only $.05/lb. The $.725/lb settlement was appropriate given spot levels and typical contract concessions. PGP has actually been relatively stable, and interestingly enough, the last time PGP contracts saw this large of a delta was the nickel increase of August 2013, a full year ago. Spot RGP slid a few cents into the high $.50s/lb.

The Polypropylene market remained sluggish and prices fell flat for the second week in a row. The market had run higher beginning in late June and the fire was further fueled when nominations to increase Aug PP contracts by as much as $.10/lb filtered through the market. However, more recently high prices and a gentler $.05/lb price increase (plus any extra margin producers can garner) sucked some gusto from buyers’ enthusiasm – many of whom had already filled their resin coffers. Still spot resin availability continues to be scarce. Initial reports indicate that in July, domestic PP demand was 1.432 billion lbs, fully 100 million lbs above the trailing 12 month average and the most since May 2013. PP exports were again about average at 48 million lbs. Polypropylene producers ran reactors at 91.6%, the hardest since last August. But it was not enough to satisfy demand, so producers pulled about 60 million lbs of resin from their collective inventories. They entered August with 1.42 billion lbs on hand, nearly 70 million lbs below the trailing 12 month average.

Spot resin trading dropped off its strong pace this week and prices for Polypropylene and Polyethylene were steady, mostly for the second week in a row. The spot resin markets have already rallied plenty; PE contracts should play catch up in September with a $.03/lb increase. Spot PP went from discount to about parity to contracts as the PGP induced nickel, plus any producer margin expansion, takes hold in August. Lower Crude Oil prices are starting to hit International resin markets, widening the gap to high Houston prices, thus disabling meaningful spot export volumes. There is still a light to good flow to traditional Latin American Markets, where processors rely on North American material for a portion of their normal supply.

Total Offers 12,765,136 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
HDPE - Inj2,568,876$.790$.850$.760$.800
LLDPE - Film2,030,048$.820$.860$.780$.820
PP Homo1,722,012$.790$.900$.820$.860
HDPE - Blow Mold1,465,024$.745$.830$.760$.800
PP Copo1,377,288$.830$.890$.830$.870
LDPE - Inj1,265,012$.770$.895$.800$.840
LLDPE - Inj1,058,208$.780$.860$.780$.820
LDPE - Film793,656$.835$.880$.820$.860
HMWPE - Film485,012$.850$.860$.780$.820
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