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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
September 12, 2014

Summary

The commodity resin markets were a bit busier, but completed volumes remained below average. Material availability began to grow and spot prices softened $.005 -.01/lb. Over the past couple of months Polyethylene and Polypropylene advanced as much as $.08/lb, outpacing the Aug and Sept contract price increases. Spot demand fell off when prices reached a premium to contracts and the first losses are just beginning to show as spot market liquidity improves. International resin prices are generally well below North American levels, disabling the spot export arbitrage from Houston.

The major US energy markets recorded mixed results. October Crude Oil futures traded in a wide $4.5/bbl range and at one point were within striking distance of the psychological $90/bbl threshold. The October futures contract snapped back late in the week, but still ended down $1.02/bbl at $92.27/bbl. Across the pond, Brent Oil prices fell $3.71/bbl to 2 year lows, ending the week at just $97.11/bbl. October Natural Gas futures peaked back above $4/mmBtu, but then slid back to settle Friday at $3.867/mmBtu, holding on to a $.064/mmBtu weekly gain. Spot Ethane added about a cent to $.235/gal ($.10/lb). Propane saw continued gains, jumping almost $.03/gal to $1.0825/gal ($.307/lb).

The spot Ethylene market remained volatile and moved higher in active trading. ExxonMobil and Formosa both experienced seemingly minor cracker disruptions, while Williams and CPChem each still have a cracker offline for long term maintenance. Ethylene for September delivery began with an up-tick and rallied throughout the week, eventually trading at $.71/lb, for a $.03/lb gain. The market was subsequently bid even higher with unsatisfied demand going into the weekend, pointing to further gains ahead. The backwardated shape of the curve steepened, each month going forward provides a deeper discount to prompt prices. Dec 2014 is currently priced a nickel below Ethylene for Sept delivery and the discounts grow from there, to as much as $.19/lb by Dec 2015, which is indicated in the very low $.50s/lb.

The spot Polyethylene market saw increased activity and for the first time in more than 3 months average prices slid $.01/lb. Nonetheless, producers should be able to implement their $.03/lb increase on September contracts. Spot resin availability was better; railcar offers were more abundant and some traders that had jacked their prices too high eased them back $.01-.02/lb in an effort to move unsold material. The marketplace is far from awash in resin and many grades are still difficult to source, but spot prices had clearly become overextended. Considering that the incremental export market is shut off by price, when full PE production returns online, sharp and swift discounts might become necessary to ship large volumes offshore and keep any potential surplus material from hanging over the domestic market. Weak International oil markets could further complicate this matter.

Spot Propylene trading activity began to pick up and prices declined. PGP for September delivery transacted a handful of times at $.695/lb, a penny lower than the previous sale, which was a while ago. Sept PGP contracts also found settlement at $.725/lb, which was a rollover from August. Initial nominations were for a $.01/lb increase. The PGP forward curve is just slightly backwardated through Dec 2014; the monthly discounts are more pronounced next year and reach almost $.08/lb by Dec 2015. Spot RGP went untraded again, but was indicated higher, closer to $.60/lb.

Polypropylene business was a little better, but the market fell short of exciting. Spot prices slid a half-cent for the second week in a row, giving back a penny of the $.08/lb jump seen during July and August. More offers, including Generic Prime, are now making their way through to the secondary market. Demand is still sluggish and widespec material is beginning to accumulate and starting to weigh a bit heavier on the market. September contracts will mostly settle flat along with PGP, although a number of producers could find some success in their $.02-.04/lb increases.

The weather is cooling and the summer is coming to an end - this season’s resin rally could also be finding the same fate. Both Polyethylene and Polypropylene heated up in the beginning of July, scorching $.08/lb gains over the next 7 weeks. Processors were heavy buyers during this period, socking away resin into the price increases. PP contracts indeed added $.05/lb in August and PE will likely secure its $.03/lb increase in September. However, spot prices for both leapt ahead of contract levels and the premiums caused the buyers to back away from additional purchases. In the coming week, it will be interesting to see the preliminary results for August domestic resin production and demand. They should provide good insight to resin inventory levels along the supply chain and perhaps lend pricing guidance in the near-mid term.

Total Offers 12,777,628 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
LDPE - Film3,008,668$.820$.910$.820$.860
HDPE - Blow Mold2,195,048$.755$.810$.750$.790
PP Copo1,624,000$.780$.880$.820$.860
PP Homo1,377,288$.770$.880$.810$.850
LLDPE - Film1,334,024$.810$.860$.780$.820
HDPE - Inj1,199,932$.775$.810$.750$.790
LDPE - Inj997,288$.820$.845$.800$.840
HMWPE - Film586,828$.800$.850$.780$.820
LLDPE - Inj454,552$.800$.860$.780$.820
 
 
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