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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
July 18, 2014

Summary

The resin markets saw another busy week; demand was strong and railcar offers were limited, so prices for both Polyethylene and Polypropylene rose again. Cracker outages and monomer’s logistical limitations have created resin production challenges thus tightening supplies. Resellers have taken advantage of the spike in buying interest to unload aged and otherwise difficult to move material. Other resellers have been active in the spot market, procuring extra Generic Prime lots for inventory and future sale. This rally, which is still in its early stages, seems to have legs.

Energy market volatility remained heightened and key products moved in opposite directions. Crude Oil saw continued pressure early in the week, briefly pricing below the $100/bbl threshold, before jumping sharply amid escalating armed conflicts in Europe and the Middle East. The August futures contract ultimately ended the week at $103.13/bbl, a gain of $2.69/bbl, almost erasing the previous week’s loss. Natural Gas fell further, peeling off another $.20/mmBtu. The August contract settled Friday at $3.951/mmBtu, nearly $1.00/mmBtu off the month ago peak.

The Crude Oil : Natural Gas ratio expanded to 26:1. Spot Ethane fell more than 2-cents to $.235/gal ($.10/lb). Spot Propane saw little change around $1.035/gal ($.293/lb).

Spot Ethylene trading was active, reeling from several cracker outages and another declaration of Force Majeure, this time by CPChem at its Port Arthur site. The market started strong, following through on the previous week’s $.075/lb gain. Ethylene for July delivery initially changed hands at $.66/lb, up $.03/lb; however, the added gains were then relinquished and by the end of the week prices reverted back to $.63/lb. Ethylene at ancillary facilities, away from the benchmark Williams’ Well, traded as high as $.78/lb. All months through 2015 lifted together in the previous week. However, as the supply issues are expected to eventually subside, the back months sold off this week, causing the backwardated shape of the forward curve to steepen. Ethylene for delivery in Dec 2014 is now priced at a $.05/lb discount to prompt; at $.545/lb, Dec 2015 is yet another $.035/lb cheaper.

Spot Polyethylene trading was swift and prices continued to rise, recording weekly back-to-back $.01-.02/lb gains. A change in market sentiment over the past month has encouraged modest restocking, this coupled with several recent resin production issues and Force Majeure declarations have quickly driven the Polyethylene market up by $.03/lb. Spot supplies of LDPE and LLDPE film grades remain snug while offers for HDPE resins have been disappearing. While those processors truly in need of quick delivery are simply paying up for material, we are starting to see some resistance at these higher prices from other buyers that still have a comfortable amount of well-priced resin on hand.

Propylene prices continued to run higher in moderate trading; PGP for July delivery added another cent to $.675/lb. With supply issues at hand likely to persist, August became a new focus and buyers paid up to $.685/lb. The market then begins to ease a tad through the balance of the year, essentially back to current levels. July PGP contracts rolled flat at $.675/lb and based on the current spot market, we would now estimate a $.03/lb hike in August contracts, but it’s early and the market could still change from here. RGP is priced around $.10/lb below spot PGP.

Polypropylene trading remained busy, even leaning towards robust. Spot PP prices jumped another $.02/lb bringing June gains to $.04/lb. Restricted resin production has been tightening supplies - add in rising feedstock costs and this fledgling rally has just turned in to a little bull market. Average PP contracts settled flat early in the month, although an effort to expand margins has been initiated by at least two producers. PP contracts this year were up $.04/lb and then dropped $.07/lb, so they are down a net $.03/lb through July and this loss +/- will likely be erased in August as a price increase is imminent.

Spot resin trading was strong, volumes were solid and prices rose $.01-.02/lb; mostly a deuce. We have been friendly/bullish this market for about a month so far and maintain our upward bias. Spot supplies are tight and traders with material are slowly ratcheting prices higher, seeking to yield better returns without turning off buyers. Other traders that also feel this market has more upside potential are cleaning out well-priced offers as they appear. Processors too are increasingly buying into the thought that contract price increases are on the way, so some are procuring some extra inventory as a supply buffer. Export interest has improved for both PE and PP, particularly from Latin American markets.

Total Offers 14,503,164 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
HDPE - Inj3,304,808$.750$.800$.720$.760
LLDPE - Film2,835,520$.740$.820$.750$.790
HDPE - Blow Mold2,548,968$.730$.780$.720$.760
PP Copo1,937,956$.770$.830$.790$.830
LDPE - Film1,673,404$.760$.840$.780$.820
PP Homo837,748$.765$.820$.780$.820
LDPE - Inj615,196$.800$.830$.770$.810
LLDPE - Inj396,828$.750$.830$.750$.790
HMWPE - Film352,736$.770$.800$.740$.780
 
 
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