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  Past Reports
Weekly Market Update
Market Update
August 26, 2016


The spot resin markets continued to transact at a rapid rate, but were somewhat slower than the fervent pace of the previous week. Polyethylene prices were mostly steady to higher with penny gains seen in certain grades. PE supplies continued to tighten into month-end ahead of the nickel increase, which is nominated for September. While resellers and processors have been picking away at PP supplies, spot offers just keep coming. With effort, Polypropylene prices gained as much as a cent; however, the market is in for a shock as at least one producer has revised its $.04/lb PP price increase to now include the imminently large jump in Sept PGP monomer costs.

The major US Energy markets were mixed. After three weeks of solid gains, WTI Crude Oil prices finally retreated; the October futures contract gave back $1.47/bbl to end the week at $47.64/bbl. Oct Brent Oil closed just shy of $50/bbl. Natural Gas prices rose every day and posted nearly a $.30/mmBtu gain; the October contract settled Friday at $2.913/mmBtu. Spot Ethylene continued to rally amid additional cracker outages. The market even accelerated its gains, leaping more than $.04/lb to approach $.40/lb – a level not seen since the beginning of 2015. Spot PGP also spiraled even higher, adding more than $.03/lb to $.425/lb, the highest since April 2015.

The Spot Polyethylene market remained active, though the volume of fresh offers slowed. Processors were busy procuring well-priced material as the September $.05/lb increase seems to have gained momentum even before the calendar turns. As current offers are purchased, the pickings have become slimmer with some grades outright difficult to source. This includes LDPE for film, with nary a prime pound to be found. The export market is only active in spurts, incremental sales are challenged by limited availability, rising Houston prices and competitive offers from Asia and the Middle East.

Although Polyethylene producers are largely vertically integrated, the pellet side of the business is getting squeezed by quickly rising feedstock costs. While the September price increase was initially viewed as a message to quash downstream calls for price relief, as time advanced and tight supply / demand dynamics persisted, it appeared that a good ole margin expanding increase could very well take hold. Now with Ethylene prices soaring, more than a dime in August alone, the cost-push argument could be the trifecta catalyst that helps PE producers secure their nickel increase in a timely fashion.

Spot Polypropylene trading was good, but not great. While the threat of a large price increase quickly taking hold is very real, and prices have indeed ticked a bit higher, ample resin supplies have kept a lid on market prices. Exports have been solid, with particular interest from Mexico, but the added demand has yet to clear the burdensome supply overhang. The market remains fairly well-supplied with both Homo and Copolymer, prime and offgrade, mostly from domestic production with some imports still lingering around.

Earlier this month, all PP producers issued a $.04/lb price increase targeted for September. With a $.035/lb rise in August PGP monomer contracts, it seemed like a reasonable attempt to cover rising costs, albeit a month behind. PGP prices then continued to advance, fueled by supply restrictions due to both planned and unexpected outages in PDH, Cracker and FCC facilities. The spot monomer market has jumped more than $.10/lb in the past 5 weeks and based on current levels, indicate another $.07-.09/lb jump in Sept PGP contracts.

However, producers spent a couple years disengaging the lock-step correlation between monomer costs and resin prices, so the automatic pass through mechanism is no longer fully intact. Given the abundance of material floating around the market and the spigot apparently still open with resin flowing strong, simple supply / demand dynamics have not been supportive to a full and timely implementation of even the $.04/lb increase. Consequently, as the week drew to a close, at least one major PP producer revised their forthcoming price increase to also include the change in Sept PGP contracts. If the rest of PP producers follow suit, the market could be eying a double digit price increase – which has not been seen since January 2013.

We have been touting the wisdom of more aggressive Polypropylene purchases to increase inventories, amazingly there are still deals available in the $.40s/lb - buy em while you can.

Total Offers 12,573,884 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
LLDPE - Film2,925,244$.545$.620$.550$.590
PP Homo1,798,852$.470$.570$.470$.510
PP Copo1,695,484$.490$.605$.495$.535
HDPE - Blow Mold1,408,852$.520$.590$.520$.560
HMWPE - Film1,406,760$.550$.600$.530$.570
HDPE - Inj1,101,748$.510$.565$.515$.555
LDPE - Inj1,055,104$.600$.685$.600$.640
LLDPE - Inj606,828$.560$.665$.590$.630
LDPE - Film575,012$.610$.700$.640$.680
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