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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
July 24, 2015

Summary

Spot resin trading was only moderately active; transactional volumes were lighter as buyers backed away from the market. Falling energy, feedstock and international resin prices have complicated producers’ July price increase efforts. Domestic Generic Prime commodity grade Polyethylene and Polypropylene resins slid a cent across the board; there were cases of larger losses seen in offgrade material. Resin prices in Houston continue to unwind as suppliers chase export opportunities into the weaker international markets. The short-near term resin market in Houston has been developing an informal backwardated shape – while prices for immediate delivery have already been softer, prices for delivery 2-3 weeks out are a bit cheaper and if there is patience for a month or so, resin can be secured a little lower still.

The major energy markets all fell this past week. WTI Crude Oil prices eroded 6%; the September futures contract lopped off more than $3/bbl to close at $48.14/bbl, a new low for the contract. Oil prices across the pond fell to nearly the same fate, Sept Brent Oil settled Friday at $54.62/bbl, down more than $2.5/bbl. Natural Gas did not fare much better, a late surge failed, so the September futures contract gave up its gains and then some before heading into the weekend at $2.775/mmBtu, a dime below the previous Friday. Ethane was the lone market in the black as it eaked out a scant quarter-cent gain to $.19/gal ($.08/lb). Propane dropped a deuce to $.415/gal ($.118/lb).

Spot Ethylene trading was markedly slower, with just a handful of transactions crossing the tape. Ethylene for July delivery most recently changed hands fractionally lower to $.345/lb. However, it is full steam ahead at the Gulf crackers; all units are well heated up and bumping full capacity, pressuring those simple hydrocarbon molecules into Ethylene and friends, just as quickly as possible! It’s almost as if they cannot wait to rebuild as Polyethylene pellets so they can further graduate to bags, bottles and the b’zillion other useful parts that the world’s consumers crave. Ooops, but no apologies for the downstream distraction, we cannot forget about Ethylene’s ho-hum forward curve. Yes, it’s still fairly flat through the balance of this year with about a penny backwardation developing during the course of 2016.

Polyethylene trading slowed to a more average pace and spot prices dropped another penny. Purchasing habits seem to be shifting as processors anticipate lower prices ahead; we are seeing more cases of minimal procurement to fill in supply gaps while opting to work off inventories. Although there was never a strong likelihood that the $.05/lb price hike nominated for July Polyethylene contracts would find either swift or complete implementation this month, it was initially the processor community that was challenged to resist the increase. Now in the face of sharply declining energy and feedstock markets, the tables have turned and PE producers are now on the line to resist the call for a price decrease. However, with a contract price rollover all but inked in July, both sides could claim a certain level of success this month. The two will square up again in August and considering current market dynamics, it seems that a price decrease of at least a few cents would be appropriate.

We are officially diagnosing the Propylene market with a chronic case of Déjà vu. Indeed, once again there were very few PGP transactions, with just a couple deals emerging late in the week; material for July delivery changed hands down another half-cent again making fresh 6+ year lows, now down to $.33/lb. July PGP contracts settled earlier in the month at $.365/lb, a decrease of $.035/lb, which was quite a high percentage loss given the price level. Traders indicate that PGP prices will ease about a half-cent through the end of the year, before building monthly increases during 2016 until a nearly 4-cent premium is tallied by Dec. RGP is in the low $.20s/lb, leaving a healthy dime margin for the splitters.

Polypropylene trading remained spotty, there has been an inconsistent flow of offers spread out between HoPP and CoPP, making transactions difficult. Widespec railcar availability is sparse and while slipping in price, spot remains higher than prime contract levels. The bulk of completed deals have been driven by processors in need of short term material, mostly due to late railcars. On average, Polypropylene contracts should see a small decrease in July, perhaps $.02-.03/lb, which is less than the monomer cost savings that PP Producers enjoyed this month. As production issues continue to plague the PP industry, producers will lean on the enduring tight supply situation in their ongoing effort to expand margins further in August and beyond.

Total Offers 12,842,492 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
LLDPE - Film2,947,336$.610$.710$.590$.630
HDPE - Blow Mold2,347,772$.600$.660$.580$.620
HDPE - Inj2,153,404$.600$.680$.590$.630
LDPE - Film1,317,196$.620$.720$.610$.650
PP Copo1,155,288$.610$.720$.620$.660
LLDPE - Inj977,380$.600$.700$.600$.640
HMWPE - Film895,472$.620$.670$.610$.650
PP Homo592,276$.600$.700$.600$.640
LDPE - Inj456,368$.650$.710$.620$.660
 
 
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