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  Past Reports
Weekly Market Update
Market Update
May 27, 2016


The resin markets continued to be very active, with the vast majority of May business conducted during the second half of the month. Railcar availability for both Polyethylene and Polypropylene was slightly better this past week, as was demand, which facilitated a high volume of transactions. PE prices averaged out steady, with some grades moving either a half-cent higher or lower. After a sharp 3-cent plunge in the previous week, PP consolidated and was flat.

WTI Crude Oil rallied above the important $50/bbl level before easing back to end the week at $49.32/bbl, still up nearly $1/bbl. NGLs were slightly higher, both Ethane and Propane notched fractional gains. Ethylene and Polymer Grade Propylene again saw little change, and remain near $.25/lb and $.30/lb, respectively.

Spot Polyethylene trading was solid, there was a well-balanced flow of both buy and sell orders which created a very liquid market in the key commodity grades. HDPE availability is leaning towards abundant; however, not all Polyethylene resins are easily available in larger quantities – such as LDPE high clarity for film and LLDPE high flow for injection.

Despite the recovery in Crude Oil prices, which theoretically should support international Polyethylene markets, Asian and South American levels have slipped amid heavy supplies, hampering incremental US export efforts. So where is the resin? Well, based on restricted production capacity mostly due to reactor maintenance, we were not overly surprised to see relatively snug supplies during this past month. According to the ACC, only 3.23 billion lbs of Polyethylene was produced in April, the lowest in 15 months.

Domestic PE sales were 2.66 billion lbs, more than 200 million lbs below March, but still 50 million above the trailing 12 month pace. April Export sales barely eclipsed 750 million lbs, nearly 9% below the 12-month average. However, the light sales tally was still too much for the low production level and it required a large 186 million lbs inventory draw to satisfy demand, leaving less than 3.5 billion lbs of collective producer inventory at the beginning of May, which was 166 million lbs below the 12-month average.

Considering the absence of another industry-wide PE price increase nomination, the buy-side of the industry has been talking about a decrease in June, especially as capacity is expected to return online. However, we have yet to see an abundance of material hit the market that might support such a price break and producers, which have plenty of room to absorb inventory, seem inclined to hold this level another month. Still, the market is maintaining a slightly bearish undertone and we can visualize softer prices ahead, at least in the spot market.

The spot Polypropylene market has been hot, better supplies and lower prices have aided transactional volumes, which continue to grow. There is a good assortment of availability, both domestic railcars and packaged imports, which incidentally are starting to thin. The sharp 3-cent decline in the previous week spurred demand; some processors required resin to run, but others were re-stocking inventories at these favorable prices.

The phenomena of PP imports have more than balanced the previously short market, wrestling pricing power away from producers and into the hands of processors. Resin producers combatted the open import arbitrage which brought in a flood of PP material, by implementing two $.05/lb price decreases - the first in April and the second forthcoming in June.

The rapidly declining prices caught some resellers with relatively high cost imported material, some of whom will likely be more cautious with their next round of import purchases. We are witnessing a classic supply/demand pricing cycle, and if it continues on cue, where lower prices restrict incremental supply, there should be another resin shortfall developing sometime during the summer, which would be accompanied by… a leg of higher prices.

Total Offers 16,590,252 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
PP Copo4,388,900$.510$.630$.520$.560
PP Homo3,224,600$.490$.590$.500$.540
LDPE - Film2,872,048$.580$.660$.600$.640
LLDPE - Film1,338,920$.520$.610$.530$.570
LLDPE - Inj1,207,196$.560$.640$.580$.620
HDPE - Blow Mold1,112,656$.490$.580$.505$.545
HDPE - Inj1,068,644$.520$.585$.505$.545
HMWPE - Film763,196$.555$.600$.530$.570
LDPE - Inj614,092$.590$.630$.590$.630
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