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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
October 17, 2014

Summary

Spot resin trading practically screeched to a halt; massive volatility in world equity and energy prices created uncertainty in the resin markets and sent buyers to the sidelines. Polyethylene and Polypropylene prices eased a penny across the board. Spot resin availability increased; there was a better flow of producer railcars and while reseller inventories are generally light, they were more eager to sell their uncommitted warehoused resins. Spot exports are shut off due to a large disconnect between Houston prices and lower international levels; however, contracted and producer direct Polyethylene exports are of course still shipping.

The major US energy markets fell sharply again this past week and December rolled to the front month futures contract. Crude Oil futures began the week with a modest uptick and then proceeded to fall apart, at one point dropping more than $6/bbl, trading near $79/bbl for the first time since June of 2012. However, the market about halved its losses and the Dec contract ended the week at $82.06/bbl. Brent Oil prices eroded nearly 5% to $86.16/bbl. Natural Gas also started higher and slid from there; the December contract bounced a nickel off its low, settling Friday at $3.863/mmBtu, down $.086/mmBtu. The Crude Oil : Natural Gas ratio came in to 21:1. Spot Ethane lost about a half-cent to settle at $.2225/gal ($.094/lb). Propane supplies kept building so prices fell further, ending the week at just $.91/gal ($.257/lb).

Spot Ethylene prices dropped in more active trading. While five crackers are still offline due to either planned maintenance or unexpected repairs, ExxonMobil’s Baytown system should return on-stream in the coming week. Ethylene for October delivery quickly shed $.025/lb to $.645/lb; the market then bounced around over the course of the week but most recently changed hands right around this level. The forward months saw good action and the weaker market pulled down the entire curve. Ethylene for Dec 2014 currently holds a $.04/lb discount to prompt levels and each month slides from there until Dec 2015 finally prices a tick below $.50/lb (actually $.49875/lb for those eager to see a 4 handle).

Spot Polyethylene shed $.01/lb in slow and nervous trading. PE demand fell silent as sharply lower energy and feedstock prices had buyers sensing lower resin prices ahead - at least spot. There was a modest increase in resin availability this past week; LDPE and LLDPE film grades have become easier to source, while HDPE injection is still spotty based on melt flow. However, mid-term Polyethylene reactor issues have kept overall resin supplies fairly snug. PE contracts have increased $.07/lb in 2014 and will be flat in October. Polyethylene has rallied some $.24/lb since Aug 2012, net of the lone $.02/lb decrease seen along the way. With international resin prices well below domestic levels and outlets subsequently limited, some think that the domestic offerings will continue to grow and prices eventually become pressured as production issues subside. With Ethylene monomer costs forecast to fall about $.15/lb through the end of 2015, perhaps even a PE contract price decrease might someday emerge.

The Propylene market saw about average activity and the week’s highlight was reaching contract settlement. Polymer Grade Propylene saw follow through weakness; material for October delivery transacted on both sides of $.73/lb and most recently at $.725/lb, down just more than a penny. October PGP contracts were first nominated to increase by $.05/lb and then revised upward to $.075/lb. Agreements have now been heard at $.765/lb, which given current spot levels, is still a generous $.04/lb jump. The forward curve remains backwardated; PGP for Dec 2014 is priced $.02/lb below current levels and another dime discount develops during 2015. Spot RGP supplies are returning and those prices are indicated back down in the mid-$.60s/lb or below.

Spot Polypropylene activity was average at best and prices were softer; Generic Prime eased $.01/lb and offgrade fell a bit more. Asking prices for spot resin have been stepping lower after initially soaring to reflect much of the $.105/lb increase that was nominated for October. There have recently been a wide range of prices quoted for PP railcars as some producers are seen holding out for a Polypropylene increase beyond the $.04/lb increase in Propylene monomer costs. PP contracts have not yet settled for those buyers whose prices are not tied directly to monomer. Some level of margin expansion will likely stick at various accounts now and perhaps more accounts within the industry over the next several months.

Spot resin trading slowed; buyers backed away from the market so resin offers accumulated and prices eased. While overall domestic Polyethylene supply has been a tad above average, producers have maintained pricing power. Although most domestic PE is ultimately derived from cheap Natural Gas, high international Naphtha (Crude) costs have traditionally kept international PE prices elevated, allowing for strong North American exports lending support to domestic PE prices. Recently, sentiment has been turning from speculative to skeptical as Crude Oil prices, sitting at the top-of-the-international Polyethylene chain, have fallen more than 20% since the beginning of the summer, consequently crimping exports. While cost increases seem to pass through quickly, it seems to take some time for lower costs to work their way downstream in the form of price decreases, but hope springs eternal.

Total Offers 18,432,852 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
HDPE - Blow Mold2,954,164$.760$.815$.740$.780
LDPE - Film2,868,656$.820$.905$.800$.840
LLDPE - Film2,849,152$.770$.840$.760$.800
HDPE - Inj2,439,956$.770$.840$.740$.780
HMWPE - Film1,953,680$.790$.850$.760$.800
PP Homo1,769,656$.790$.890$.830$.870
LDPE - Inj1,307,472$.770$.840$.790$.830
LLDPE - Inj1,209,380$.780$.830$.760$.800
PP Copo1,080,736$.790$.930$.840$.880
 
 
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