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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
February 14, 2020

Summary

It was a very busy week at The Plastics Exchange, there was non-stop activity from the get-go, and a high volume of material changed hands. Supply improved and railcars came and went in groups, as buyers were eager to procure material. This week’s sales favored railcars over truckloads and prime more so than offgrade and buyers still sought more as the week came to a close. Export demand was excellent and bids moved higher, lending support to the domestic market. While our prime commodity PE and PP resin prices appeared flat this week, the market was indeed strong and firmly consolidated to the topside of the $.03/lb average gain that spot earned over the last 6 weeks. Buyers paid up this week and absorbed the early 2020 bump in pricing, but also showed strong resistance to more, hence no additional advancement in our benchmarks this week. We do, however, feel there is good momentum and prices could continue to move higher as long as there is no new market shock or major acceleration in the spread of the Coronavirus, which has already begun to threaten the Chinese and global economy.

The major energy markets were mixed this past week. WTI Crude Oil finally showed some resilience after its 5 week $16/bbl loss. The sharp and steep break first resulted from the de-escalation of US / Iran tensions and has more recently been attributed to the economic damage related to the Coronavirus. The March WTI futures contract flirted with the $50/bbl level again this week, it found support and ultimately secured a gain of $1.77/bbl to $52.32/bbl. Brent Oil was hit harder than WTI and this week outperformed to the upside on this bounce back, March Brent added $2.85/bbl to $57.32/bbl, bringing the spread to a clean $5/bbl. Natural Gas futures managed to dig a deeper hole and reached a new contract low of $1.766/mmBtu. The market did stage a recovery rally the balance of the week, but failed to close the gap and scored a net loss of $.021/mmBtu to $1.837/mmBtu. NGLs both rebounded from the previous week’s losses. Ethane was up a penny to $.142/gal ($.06/lb). Propane gained a half-cent to $.387/gal ($.11/lb).

Monomer trading was again fairly active; bids and offers were plentiful, volume was good and prices were mixed. Ethylene saw interest throughout the week, but only a few deals managed to visibly come to fruition. Prompt material sold at $.155/lb early in the week and then most deals were focused on future deliveries. By Friday afternoon Ethylene had trickled lower and spot Feb ended at $.15/lb, down a half cent. A few other forward deals were inked and the contango narrowed with much of the curve losing a full penny. PGP saw heavy participation and volume was hefty, but all visible transactions were completed for the future. There was seemingly no demand for prompt Propylene and likewise, spot ended the week flat at $.29/lb. Feb PGP contracts settled at $.32/lb, down a penny. It was a quick negotiation, which more typically completes closer to month's end.

It was a very good week to trade Polyethylene; the flow of offers improved, albeit at higher prices, and transactions came together at a fairly rapid rate. Our completed volumes were strong and ran well above the 2019 average, as a smattering of fresh railcar offers were finally shown to the spot market, satisfying some pent up demand. LDPE for film and other more specialty LLDPE grades were still tight amid ongoing production issues, which boosted activity for spot truckloads requiring immediate shipment; HDPE resins were amply available and that demand was unenthusiastic. Spot Polyethylene deals generally consolidated at the higher end of the recent price range as the marketplace worked to digest the Jan $.04/lb increase, which was finalized in early Feb. There is another $.05/lb contract increase on the table, but a $.09/lb jump seems unpalatable at this time. Suppliers began pushing for the additional gains, but there was plenty of pushback from buyers, citing the need to first move the $.04/lb increase downstream, which is a stark change in light of the longer-term downtrend. Other processors were still happy to work off their sharp December purchases choosing to wait and see before paying up for more material.

Polypropylene trading picked right back up after a somewhat slower stint to start the month, which had mostly been due to a lack of supply. Availability improved a touch this past week, but was still considered to be fairly tight after the sizable purge seen during the second half of Jan. The flow of domestic railcars resumed, both prime and offgrade, and those priced just a penny or two higher were scooped up in a heartbeat, but sellers asking for more saw buyers quickly turn away. PP Export demand and pricing remained notably strong and provided an additional outlet and competed for supply. The week ended with supply thinning from strong sales and buyers still seeking more material.

While PP resin prices and PGP monomer costs are well related, we have seen them begin to de-couple from the absolute lock step that had persisted for years. This change was apparent these last few months when resin prices fell more than monomer and we are now starting to see this pricing trend reverse as producers begin to regain a sense of pricing power. Feb PGP monomer contracts just settled this week down a cent to $.32/lb, but in contrast, the spot PP resin market firmed further this past week. Producers have been slowly raising asking prices seemingly to help enable an official $.03-.04/lb margin increase slated for March. Considering that PP prices got overdone to the down-side, while recent turnarounds and supply chain issues have limited production and resin inventories, we believe the increase has some merit and we view the market with a bullish prospective.

Total Offers 13,959,272 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
PP Homo2,563,220$.425$.545$.450$.490
HDPE - Inj2,469,104$.390$.460$.365$.405
PP Copo2,405,472$.430$.550$.470$.510
HDPE - Blow Mold1,932,668$.390$.460$.375$.415
LDPE - Film1,339,564$.460$.550$.490$.530
LLDPE - Inj1,277,656$.420$.525$.460$.500
LLDPE - Film833,564$.395$.480$.390$.430
HMWPE - Film705,472$.380$.420$.365$.405
LDPE - Inj432,552$.430$.550$.460$.500
 
 
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