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Summary
There was a considerable increase in resin activity this past week as demand rose in light of additional production issues alongside upward pressure from elevated Crude Oil and rising upstream monomer costs. While a few producers released several large groups of offgrade railcars for spot sales, resellers, some who had been caught short of supply, quickly scooped up most of the material, though some offers filtered through. Some Prime railcars also changed hands at prices that continued to edge higher. The end result translated to another $.01 - .015/lb gain for Prime Polyethylene and Polypropylene resins across our spot trading platform. Most PP resin contracts for September should follow PGP monomer up about $.045/lb. PE producers have nominated a $.05/lb increase for September. A major industry publication has estimated their September Polyethylene index to be up $.03/lb, but they have also later revised their estimates, though we do not recently recall a downward revision being made. If Sept PE contacts indeed go up $.03/lb, it would place them up $.09/lb for the year, including the $.03/lb increase garnered in August, while in contrast, our spot Polyethylene prices are down an average of $.022/lb since 2023 began. There has been a large range based on grades, the worst performer has been LDPE for Film, which is down $.06/lb, the best performer has been HMW HDPE for Film which has been up $.03/lb, all of our other commodity PE grades have been moderately lower for the year. As we have noted before, we do not mind a price increase as we hold plenty of inventory, but only wish we could sell our resin at prices that are up $.09/lb for the year. We just call it like we see it.
The resin market was hit with yet another supply disruption, this time from Braskem America, which confirmed it would shut one of its Polypropylene lines at its Marcus Hook, Pennsylvania plant due to continued global economic uncertainty. The plant's two production lines, which are about equal in size, have a combined annual capacity of nearly 900 million pounds. This newest PP disruption joins Ineos, which has an FM on HoPP at its Carson, California, plant. On the PE side, Nova remains on FM for Polyethylene at its facility in Ontario, while CP Chem has its FM in place on HDPE at its Orange facility in TX. In addition, for the past several weeks both PEMEX and Braskem-Idessa, have been facing Polyethylene production issues at their plants in Mexico.
North American resin producers continued to enjoy their cost-advantaged position and have been channeling the bulk of their incremental sales through the still-hot export market, particularly in PE though growing in PP. High and still rising international feedstock costs have made overseas destinations including LatAm, Europe and Asia very viable outlets for producers as they seek to keep operating rates relatively high while still reducing inventory positions in light of challenging domestic demand. While Mexico has naturally been a reliable export destination, moving product down south of the border is expected to face significant challenges during the next few weeks. Ferromax, Mexico's largest rail company, stopped up to 60 trains this week on runs from the north of Mexico into the US due to heavy migrant hitchhiking on equipment. Another key transit bridge at Eagle Point, TX has also been shut by customs, further straining transit through the key Laredo, TX location. For those in need of spot material, please keep in mind that we have hundreds of truckloads across the full slate of commodity PE and PP grades already packed and ready to ship.
Polyethylene trading improved, but domestic sales still fell short of our traditional results; September has been weak even on 2023 basis and most fellow distributors / resellers tend to agree. HDPE Blow Mold was the preferred resin of choice this week, with LDPE and LLDPE transactions close behind. All commodity PE grades regained at least the penny that had been lost a week earlier, LLDPE resins picked up an additional half-cent. While high volume commodity grades can be found, even if the price is higher than desired, some less voluminous grades have been outright difficult to secure, including LDPE and LLDPE injection, especially granular. Rotomolding resins are also tight, as are EVA and EMA materials; HMW for film and HDPE for Dairy bottles are scarce too. We continued to find solid PE export demand, though sourcing competitive supplies remained a challenge. While North America PE exports have been notching records month after month, most of the new sales seem to be through producer direct sales efforts, somewhat circumventing broker channels; again, fellow exporters tend to agree. The increase in PE spot levels during the month, along with a strong export market, and recent FMs, have given producers further ammunition in their push for another increase of up to $.05/lb for September contracts after somehow securing a 3-cent increase for August.
Spot Polypropylene trading was better, but similar to Polyethylene, completed volumes have been disappointing especially considering the fairly volatile market. Our completed volumes for HoPP outstripped CoPP this past week. The ongoing monomer and resin production issues lifted PP pricing by $.015/lb on the week, regaining the previous week’s loss, thus returning the monthly spot gain to $.025/lb. Producers have been asking higher levels for spot prime railcars but we have found larger processors resisting the prices, citing adequate supplies. The UAW strike is also impacting PP demand from the auto market. Truckload buyers that are more hand to mouth have had little choice but to pay prevailing prices. As noted above, Braskem is idling one of its PP production lines at their older Marcus Hook, Pennsylvania site. As technologies evolve, we expect to see more shuttering of older and less efficient plants like the recent announcement by LBI to close a 500-million-pound PP unit in Brindisi, Italy. We expect September Polypropylene contracts to rise in line with the pending $.045/lb PGP monomer increase; attempts to expand contract margins were mostly unconcerted, even though supply / demand is more in balance than it was in recent months.
Monomer markets were again very active and completed volumes outpaced the previous week's large tally as prices moved higher. Ethylene shot out of the gates Monday with strong trader interest and that afternoon a couple of deals for 1Q’24 deliveries were completed as well as a transaction for 4Q’23. On Tuesday, prompt Ethylene values crept higher and Sept deliveries changed hands three times at $.225/lb, up a half-cent from Friday; a deal for 4Q Ethylene was also done at the same $.225/lb. Another hefty volume day was seen Wednesday, a couple executions for 4Q deliveries were realized at $.2175/lb and traders eyed prompt material, swapping Sept Ethylene for Nov, 4Q, and 1Q deliveries each in independent transactions. Over in Louisiana, a sale for Sept Ethylene was secured at $.215/lb and the geographical premium for spot material in TX was reestablished at a cent. Traders quickly moved back to The Lone Star State and bartered Sept pounds three times at $.225/lb, exchanged Sept/Oct deliveries thrice and finalized one more deal switching Sept and 1Q deliveries. Several bids and offers hit the market through Friday afternoon but further executions could not be cemented. Spot Sept Ethylene finished the week up about a half-cent to $.225/lb and the forward curve was fairly flat.
The Propylene market began with tepid enthusiasm, but sentiments quickly turned and the key feedstock began to unlock heavy participation as prices climbed. Though the Dow PDH has returned to operation, the Enterprise #1 PDH unit in Chambers County, TX remained down and it was reported that the newly operational #2 unit was flaring, though no statements were provided on whether it was problematic. These issues, coupled with other spot PGP demand from BASF as their heavy cracker remains offline, added to the upward pricing pressure. There was also positioning into 2024 as 1Q turnarounds are planned. Market interest surfaced Tuesday morning as spot moved more than a penny higher, participants swapped spot Sept PGP first at $.375/lb and then later at $.3775/lb. Oct also changed hands at $.3775/lb and four different deals flipping 4Q' 23/1Q '24 PGP deliveries were inked, the completed volume on Tuesday was quite high. The market jumped up another penny midweek when Sept PGP was brokered at $.385/lb. Prompt material commanded an additional half-cent on Thursday as participants secured Sept at $.39/lb. A deal for Oct PGP was also completed Thursday at $.39/lb along with an agreement for Propylene deliveries during all months of '24 at $.4025/lb. Following three straight days of gains, prices pulled back a touch on Friday and Sept exchanged hands at $.385/lb, and the $.025/lb gains outpaced the spot Sep PGP weighted average which rose a cent to $.375/lb. Most deferred contracts saw larger increases and the forward curve moved into a normalized contango. Though it has yet to be finalized, Sept PGP contracts are gravitating towards a $.045/lb gain to $.39/lb, in line with our target estimate.
The energy complex was mildly mixed with only modest movement; WTI and Brent Crude Oil ended the week in opposing directions for the first time in a long while, while Nat Gas was just slightly lower. The market examined the impact of Russia's export ban on gasoline and diesel and potential future rate hike from the Fed. The softness in Nat Gas was mostly driven by more autumn like weather across the US. November WTI futures, which rolled to the front month, traded within a $4.06/bbl range from a Tuesday high of $92.43/bbl to a Thursday low of $88.37/bbl. Nov WTI finished Friday at $90.03/bbl, up a single cent on the week. Nov Brent Oil followed a similar daily trading pattern within its $3.75/bbl range; however, on Friday prices deviated from WTI as Brent posted a small daily loss and ended the week at $93.27/bbl, down a net 66 cents. Nat Gas also made its high on Tuesday and low on Thursday, but traded in a larger 10% range. The Oct futures contract went into the weekend at $2.637/mmBtu, down just a fraction of a cent. NGLs gave back some ground, Ethane posted its first net loss in 7 weeks, when it ended Friday at $.300/gal ($.127/lb), down $.013/gal, while Propane recorded its first net loss in 5 weeks, dropping almost 3 cents to $.737/gal ($.208/lb).
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Total Offers
14,962,468 lbs
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Spot
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Contract
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| Resin | Total lbs | Low | High | Bid | Offer |
| HDPE - Blow Mold | 2,853,680 | $.480 | $.560 | $.495 | $.545 |
| PP Copo | 2,145,312 | $.520 | $.640 | $.575 | $.635 |
| PP Homo | 2,084,404 | $.510 | $.600 | $.515 | $.575 |
| LLDPE - Film | 2,063,956 | $.490 | $.560 | $.490 | $.540 |
| LDPE - Film | 2,011,404 | $.515 | $.580 | $.500 | $.550 |
| HDPE - Inj | 1,977,564 | $.484 | $.560 | $.490 | $.540 |
| LLDPE - Inj | 953,196 | $.525 | $.600 | $.540 | $.590 |
| HMWPE - Film | 485,012 | $.520 | $.570 | $.500 | $.550 |
| LDPE - Inj | 387,940 | $.550 | $.640 | $.570 | $.620 |
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