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  Past Reports
Weekly Market Update
Market Update
June 24, 2016


Spot resin trading continued to improve, though June transactional volumes remain below the completed tallies of both April and May. While the market dynamics of Polyethylene and Polypropylene are currently very different from one another, demand for both has been slow amid bearish market sentiment. The stunning Brexit vote (Great Britain chose to leave the EU) could generate an even deeper sense of caution as resin market participants, and political / economic pundits in general, contemplate the potential and far reaching impact.

August WTI Crude Oil futures took center stage; the Aug contract had already been priced at a premium to July and the market traded higher all week, peaking at $50.54/bbl – before plunging $2.47/bbl on Friday to $47.64/bbl in the wake of the Brexit vote. Aug Nat Gas rallied further and reached above $2.80/mmBtu for the first time since October. NGLs bounced back; Ethane regained the 7% it lost the previous week and Propane added $.02/gal. Ethylene fell $.015/lb to $.24/lb; PGP saw little change and remained around $.305/lb.

The spot Polyethylene market began to pick up; resin availability increased and prices were lower across all commodity grades. Many processors withheld their large orders this month, limiting high cost purchases while they tried to negotiate a price decrease for June contracts. Demand was a bit better this past week as some processors found their inventories drawn to uncomfortably low levels and simply required resin. Although higher volumes of Polyethylene transacted at lower prices this week, processors’ overall strategy did not play out perfectly…

Producers kept their material offerings light during the past several weeks and the relatively snug conditions helped secure a price rollover for June. PE contracts began the year with a $.05/lb decline during Jan/Feb, quickly added $.09/lb in Mar/Apr, and held flat in May and June, so contracts are up a net $.04/lb for 2016. With this month’s negotiations out of the way, we expect a heavier flow of offers into month/quarter end, which could finally set up for a decrease - processors would like to see that $.04/lb unwind in July. Crude prices are retreating from their recovery rally while Brexit is stirring anxiety, so considering what follows, we think the PE market is now poised for a decline…

Polyethylene supplies are improving: while some crackers and reactors still have persisting production issues, the vast majority of the turnaround projects have been completed and producers’ resin inventories have been growing. Exports are lagging: producers have utilized the robust export market to balance off over-supply, but May’s exports were the lowest in 15 months, and while June is still in play, activity has been diminished - the strengthening US $ will not help. Seasonal weakness: the end of June / beginning of July is traditionally a slow period as many processors take a vacation while reactors keep churning out more pellets. There should be some exciting month end deals available, just let us know what you need.

Spot Polypropylene trading was solid, there was a healthy flow of both supplier offers and processor requests. The heightened activity translated to slightly lower prices and good transactional volumes this week. June PP contracts were mostly down $.05/lb, with some variation seen by producer and product. Those contracts still with a monomer component would be impacted by the slight $.005/lb increase in PGP contracts. Others might see a lesser decrease for Copolymer products, particularly those of a more specialty grade.

While the majority of the imported resins seem to have been sold, some imported PP Copolymer resins are still lingering in warehouses around the country. However, the market is still reeling from the major surge in Polypropylene supplies; some demand had shifted away from consuming domestic production which created a large surplus of Generic Prime railcars that required disposition. It is part of the process and PP producers have been proactive to push the market cycle along to eventually regain pricing power.

Producers aggressively lowered contracts to shut down the import arbitrage, regain market share and stimulate processor demand at attractive price levels not seen since 2009. At the same time, there have been several significant purges of inventory into the export market to help eliminate the supply imbalance. The Polypropylene market has fallen sharply during the second quarter, contracts lopped off a full dime and spot prices eroded even more. While the market could potentially still slip some, we think there is limited downside at this point and foresee higher prices ahead once the market bottoms out and begins to recover.

Total Offers 16,578,800 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
PP Homo4,360,392$.460$.550$.460$.500
HDPE - Blow Mold2,479,588$.490$.560$.480$.520
HDPE - Inj2,106,828$.495$.555$.485$.525
PP Copo1,662,104$.480$.600$.500$.540
LLDPE - Film1,553,656$.500$.570$.510$.550
LLDPE - Inj1,513,840$.545$.640$.575$.615
HMWPE - Film1,055,012$.475$.560$.510$.550
LDPE - Film955,012$.580$.665$.580$.620
LDPE - Inj892,368$.525$.640$.585$.625
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