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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
July 13, 2018

Summary

It was an excellent trading week, the spot resin markets were busy and deals came together rather easily. Buyers were serious, practically showing up with orders in hand; suppliers were also quick to respond with competitive offers. Consequently, the vast majority of spot resin needs that were presented to our trading desk, were indeed filled. This was a welcomed change from the holiday interrupted first week of July, when supply was relatively illiquid and completed volumes fell below average. PE producers are once again seeking to implement their old $.03/lb price increase; downstream players tend to think that a decrease would be more appropriate. PP contracts will likely see little change in July. Most grades of Polyethylene and Polypropylene eased a cent this past week.

Once again the major energy markets ended the week in the red, receding further from recent cycle highs. Crude Oil sandwiched a sharp $3.73/bbl mid-week drop amid four other days of limited price change. The August futures contract had again pierced below the $70/bbl threshold before bouncing to end the week at $71.01/bbl, down a net $2.79/bbl. Brent Oil saw similar action, but was a bit more volatile; its Wednesday plunge was a staggering $5.46/bbl, surrounded by four days of moderate gains. The September futures contract settled Friday at $75.33/bbl, down just $1.78/bbl. Aug Nat Gas futures fell $.106/mmBtu to settle at $2.752/mmBtu. It reached above $3/mmBtu less than a month ago, but has already retreated back towards the lower end of the tight range it has held during 2018. After several weeks of good gains, Ethane prices shed $.015/gal to $.365/gal ($.154/lb); the market is steeply backwardated as each forward month is currently priced at an increasing discount to prompt levels. Propane gave a bit back this past week to settle down $.03/gal to $.93/gal ($.263/lb)

The monomer markets were moderately active and prices firmed, though there was much more quoting than actual transactions. Ethylene for July delivery changed hands at $.15/lb and was subsequently bid fractionally higher, earning it a solid penny gain. The forward curve is in contango, as future months are priced at increasing (albeit modest) premiums. PGP trading activity was uninspiring, while bids were sometimes inched higher during the week, participants did not appear eager to transact and the week ended with the prompt market near $.57/lb, up about a penny. These current levels support a rollover in July contracts, but there is still time in the month for something to change.

Spot Polyethylene trading returned from the holiday break with a bang. Our trading desk was busy filling orders as market participants made up for lost time, mostly procuring material for near term delivery dates and keeping orders smaller, perhaps anticipating lower pricing ahead. Spot PE prices decreased a penny last week, except for LLDPE Injection which held flat. Producers continued to reiterate their intention to increase contract prices $.03/lb in July, which at this point seems unlikely based on current spot market activity. In June, producers collective PE inventories drew down more than 90 million pounds after building in 6 of the previous 7 months. This draw can be attributed to higher export sales, which were a record and above a billion pounds for the second month in a row, coupled with reduced operating rates, which came in just below 90%. Despite the draw, inventory levels are still massive at over 4.7 billion pounds.

As the USA vs Everyone trade conflict heats up, Polyethylene players are becoming quite concerned. Some traders began lowering asking prices trying to thin out inventories in preparation for retaliatory tariffs taking hold as material that would normally be exported to China would suddenly become 25% more expensive, thus crushing demand. Although there is not a firm date for all of these tariffs to take full effect, some traders have already diverted cargoes heading to China to be stored in other countries in hopes that this will blow over quickly. The economics of it all will surely affect US ports as well as they have been adding infrastructure to accommodate the large expansions which the Petrochemical Industry is undertaking. If you have questions of how this may affect your business do not hesitate to call our trading desk to discuss.

Spot Polypropylene trading was very busy, there was a steady flow of buyer bids / seller offers that pelted the market and prices slid a cent. The vast majority of domestic offers were widespec railcars, while prime needs were often filled with packaged imports. Processors picked away with mostly truckload orders as elevated prices in the 70s and into the 80s discouraged higher volume purchases. Still, the market is getting used to seeing these prices and the sticker shock has worn off, this could provide this cycle some added longevity. The reseller community was also an active participant this past week as some had been limiting inventories at these heightened levels and fell short of material to fill customer needs. The Plastics Exchanges’ anonymous trading platform facilitated numerous inter-dealer transactions to fill in these supply gaps. The first half of 2018 was quite volatile price-wise; however, we expect to see little change in July contracts, even as spot prices are jumping around.

Total Offers 13,235,064 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
LLDPE - Film2,733,704$.530$.600$.500$.540
PP Homo1,971,584$.640$.770$.650$.690
LDPE - Inj1,734,128$.620$.690$.620$.660
PP Copo1,727,300$.670$.780$.690$.730
LDPE - Film1,278,116$.600$.680$.590$.630
HDPE - Blow Mold1,273,380$.570$.630$.550$.590
HMWPE - Film1,041,380$.610$.670$.590$.630
HDPE - Inj990,460$.540$.590$.520$.560
LLDPE - Inj485,012$.650$.740$.630$.670
 
 
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