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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
January 13, 2017

Summary

Spot resin activity picked up dramatically in this first full business week of 2017. Volume for completed transactions was high and prices for both Polyethylene and Polypropylene rose, some sharply. There was clearly some pent-up demand as buyers came out in droves to procure material. The markets were further ignited by price increase pressures, which gained credence amid firm and/or rapidly rising monomer costs and light resin inventories throughout the supply chain. Houston area logistics remained challenged by rail congestion and packaging houses still operating at full capacity. Exports remained robust, but will likely be trimmed back a bit as US resin prices rise.

WTI Crude Oil again had only a $3/bbl range; the Feb futures contract closed Friday at $52.37/bbl, a loss of $1.62/bbl. March rolled to the front month for Brent Crude Oil and it shed $1.65/bbl to $55.45/bbl. Natural Gas prices were very volatile, trading in an 11% range. The Feb futures contract ultimately regained $.134/mmBtu of the previous week’s much larger losses. Ethane prices saw little change, again ending the week just shy of $.25/gal ($.105/lb); Propane saw just a fractional gain to $.725/gal ($.205/lb). Ethylene was active but held a tight penny range, closing the week around $.305/lb. Spot PGP was very active and jumped again, adding another nickel to the previous week’s huge $.07/lb gain – in the past few weeks, spot PGP prices have risen about $.15/lb, a full 50%, to $.45/lb.

Polyethylene trading was very good, transactions were above average and prices rose as much as $.02/lb. Processor demand improved and those in need of material were willing to pay up for prompt shipments. The market is not yet flush with resin, but liquidity began to rebuild after the extended holiday affected market. Fresh railcars began to appear, but the flow into the spot market was still slow as resellers required material to back-fill orders and others held on to cars for later sale. The rising spot market has been quickly closing its discount gap to contracts and some grades are now premium, which adds credibility to the $.05/lb price increase nominated for February. In the meantime, there is still opacity regarding the $.02/lb decrease that some, but not all saw for Dec contracts.

We felt it coming and it now seems that Polyethylene exports reached record levels in December, likely even eclipsing the billion pound milestone. Processor demand was also better in Dec, but only back to the 2016 monthly average. After light buying in Oct/Nov, it still leaves downstream inventories low and processors susceptible to upward pricing. The heavy shipments helped producers pull around 150 million lbs from their aggregate inventories, so they ended 2016 a tad under year ago levels - around 200 railcars below 3.5 billion lbs.

The spot Polypropylene market was very busy, the flow of resin offers was only sporadic, but available material did not sit around very long. Both processors and resellers were active buyers, securing practically every well priced prime offer that came available. PP prices ticked higher throughout the week; as offers were sold, they were generally replaced with fewer loads at higher levels and ended $.03/lb above last Friday. Resellers were seen covering old orders before prices got away from them; they were also buying for future sale as there appears additional upside ahead.

We have been vocally bullish for the past 6 weeks, as we saw and participated in the burdensome supply overhang cleaning up – we advised to rebuild inventories at prevailing historic bargain prices. While it took time to open considerable export channels, offshore sales have begun to hit on all cylinders. PP exports in December reached about 1000 railcar equivalents, 10X year-ago volumes and the most since June 2009. Domestic demand also increased substantially from Oct/Nov levels, but like PE, only back up to 2016 averages. The better sales, coupled with disciplined production, contributed to a consecutive sizable draw from aggregate producer inventories, together almost 300 million lbs, leaving them the lightest since we began tracking these figures more than 10 years ago.

With PGP monomer soaring, PP inventories very light throughout the supply chain and pricing power firmly back in seller’s hands, we see potential for considerable upside still ahead for PP prices. We also anticipate a large inflow of fresh imports to counter. This market is again getting very interesting and should continue for some time – stay tuned! And hey - this last acceleration happened fast, those that regularly call in to the trading desk (312.202.0002) were informed in real-time…

Total Offers 11,311,880 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
HDPE - Inj1,879,128$.510$.570$.500$.540
HDPE - Blow Mold1,760,472$.490$.580$.500$.540
PP Homo1,574,116$.480$.560$.500$.540
LLDPE - Film1,482,300$.525$.590$.510$.550
LDPE - Film1,381,564$.600$.700$.630$.670
PP Copo956,276$.490$.630$.520$.560
HMWPE - Film865,012$.530$.580$.510$.550
LLDPE - Inj820,920$.570$.620$.565$.605
LDPE - Inj592,092$.595$.640$.570$.610
 
 
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