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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
July 14, 2017

Summary

The spot resin market remained active during the second week of July. Overall deal flow was heavy; completed volumes were above average and strongly slanted in favor of Polyethylene over Polypropylene. Most PE grades rose at least a penny, with additional strength seen in PE injection grades. After aggressive buying the previous few weeks, Polypropylene demand began to falter; HoPP prices slid a half-cent while still tightly supplied CoPP resins managed steady. The export market was mixed, sales were still seen sluggish to the Indian and Chinese regions, but better to Mexico, no doubt aided by the strengthening value of the Peso. There is no PE increase on the table until August. July PP contracts will see little change.

The major energy markets recovered. WTI Crude Oil established its low as the week began and ended just off the highs. The August contract gained more than 5% to settle Friday at $46.54/bbl, up a net $2.31/bbl. Sept Brent Oil futures added $2.20/bbl to end the week at $48.91/bbl. Aug Natural Gas futures recouped a chunk of the previous week’s heavy losses, bouncing $.116/mmBtu to $2.98/mmBtu. Spot Ethane edged $.005/lb higher to $.25/gal ($.106/lb); Propane jumped more than $.03/gal to just above $.63/gal ($.179/lb).

The monomer markets were busier and a high volume of material changed hands. Ethylene was particularly active and prices moved around within a $.025/lb range, which at this low level, represented more than 13% of value. After making new lows, the market recovered and the week ended with prompt material gaining just $.0025/lb to $.19/lb, still near the 18 month lows. Forward markets currently indicate moderately higher prices to nearly $.22/lb by the end of this year. The spot Propylene market continued to be pressured and recorded its 3rd straight weekly loss, albeit a smaller one. PGP for July delivery shed $.0075/lb to below $.36/lb. The recent spot market weakness squashed the early call for a several cent contract increase; July PGP settled at $.39/lb, managing just a half-cent gain.

Spot Polyethylene trading was solid with done deals spread out along the full slate of commodity grades. HDPE injection remains snugly supplied, especially high melt flow materials; LLDPE and LDPE for injection have also tightened. Although there was a steady stream of other PE offers, asking prices were generally raised higher as producers seek to eliminate the current spot discount while they eye their $.03/lb increase nominated for August. Even as the market firms, more than just a shadow of doubt looms upon the increase, as reactors continue to run above 95% capacity and the most actively transacted PE resins, HDPE for blow mold as well as LLDPE, LDPE & HMWPE for film are all readily available.

Upstream Polyethylene inventories built for the 4th straight month, bulging nearly 600 million lbs during this period to the highest level in 16 months. With the second half of 2017 now well underway, processors are keen to note that the 3 additional resin facilities slated to come online later this year should keep the market amply supplied and barring further delays or general operating disruptions, weigh on prices. However, with many billions invested by the petrochemical producers, sales for these forthcoming resins have not gone unplanned. We do expect periods of heightened volatility ahead, especially when the plants are newly running and making prime resin. However, remember that supply and demand will always find balance… at a price, whatever level that might be. When Polyethylene producers do lose pricing power, they seem to regain it fairly quickly, though it might be from a lower level.

After two months of good demand, the Polypropylene market has begun to slow down. Processors had already made great strides towards rebuilding inventories as second quarter price relief came through and with the monomer recovery rally exhausting, fears of resin prices sprinting higher seem to have been allayed. Still, producers have shifted their thoughts from simply passing through monomer movement, hoping to instead leverage the tightening supply / demand dynamics to actually expand margins. The first of what can become a series of margin enhancing increases, ranging from $.03-.05/lb, has already been nominated for August. Perhaps the timing is right…

Even though producers ran their Polypropylene reactors above 93% in both May & June, increased resin sales, both domestic and export, outstripped production and contributed to a large draw of nearly 200 million lbs from producers’ collective inventories during the second quarter. They entered July with barely 1.4 billion lbs on hand, the lowest since Jan 2013. On the flip side, total PP resin sales in June exceeded 1.6 billion lbs for the first time since October of 2007 – nearly 10 years ago. Do not be lulled to sleep by the small $.005/lb increase in July PGP contracts, unlike in PE, there is no new PP capacity coming - we maintain at least a modest bullish outlook, which is still dependent on monomer prices maintaining at least their current mid $.30s/lb level.

Total Offers 15,523,736 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
HDPE - Blow Mold2,510,772$.480$.550$.480$.520
LLDPE - Film2,469,152$.510$.595$.505$.545
LDPE - Film2,210,048$.560$.645$.560$.600
HMWPE - Film2,072,324$.540$.570$.510$.550
PP Homo1,915,564$.490$.575$.485$.525
LLDPE - Inj1,581,036$.590$.660$.560$.600
PP Copo1,378,012$.480$.610$.530$.570
LDPE - Inj776,828$.600$.635$.570$.610
HDPE - Inj610,000$.610$.660$.580$.620
 
 
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