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  Past Reports
Weekly Market Update
Market Update
July 16, 2021


Spot resin activity heated up like our hot Scottsdale sun and the heavy order flow made up for recent slack demand. There were fresh production disruptions and a new Force Majeure declaration along with another surge in monomer costs that were supportive to pricing. Strong buying was seen across all commodity resin groups as some processors, still weary from ongoing resin shortages, sought confirmed supply well into August. Even with buyers keen to procure, there was meaningful resistance to asking prices and in some cases, some easing was needed to encourage buyers to commit.

Though North American resin production has improved significantly, and spot material availability has somewhat increased, the overall Polyethylene and Polypropylene markets remain very tightly supplied. Producers have been back-filling contract orders and busy rebuilding their inventories, partly as a buffer to counter against the potential of production disruptions from both upcoming planned maintenance and the chance of unplanned outages as we head deeper into hurricane season.

A significant volume of imported resin, mostly HoPP, CoPP, and HDPE has been arriving at US shores to supplement insufficient domestic supplies, and while more shipments are still sailing, it seems that peak import buying is behind us, at least for this leg of the cycle. Soaring ocean freight, which for some lanes has surpassed $15K/container, along with extended transit times, long port delays, and massive demurrage fees, has crimped the arbitrage and largely squashed the high-volume import incentive for importers. Some new overseas buys are still occurring, but nowhere near the volumes nor veracity seen during the previous several months.

Producers continued to pile on the increases to keep upward pressure on pricing; there are $.03-.05/lb hikes on the table for both PE and PP contracts for July, and a new $.05/lb increase has been nominated for August. With contract levels relentlessly trekking higher while spot levels have been primarily stagnant at these heightened levels, the spot premiums have diminished with fewer large contact buyers in need of significant extra supply and competing for pellets to press prompt prices higher.

Energy futures moved mainly to the downside. Crude oil came off for the second straight week on concerns of declining demand as drivers face the highest prices at the pump in 7 years. According to the latest EIA data, US crude stockpiles reduced for an eighth consecutive week, drawing down almost 8 million barrels, but this was overshadowed by weaker underlying gasoline demand and a million barrel buildup in gasoline supplies. Another cause for worry is the rise in Covid-19 Delta variant cases, which could lead to another batch of lockdown restrictions and depressed demand.

August WTI made its way back down towards the $70/bbl mark, before bouncing back late Friday to end the week at $71.81/bbl, down a net $2.75/bbl. September Brent finished Friday at $73.59/bbl, almost $2/bbl below the previous week. August Natural Gas established its weekly high on Monday and its low on Friday, and despite its $.185/mmBtu range, ended the week absolutely flat at $3.674/mmBtu. NGLs prices were mildly mixed for another week; Ethane closed Friday at $.306/gal ($.129/lb), a fractional gain, while Propane shed just over a quarter-of-a-cent and went into the weekend at $1.10/gal ($.311/lb).

Monomer prices kept on a mixed pace amid increased volatility. Spot Ethylene dominated trading activity and resumed the previous week’s rally after a spate of cracker issues emerged. July Ethylene opened Monday with a spot trade at $.54/lb for delivery in Louisiana, then jumped a nickel selling at $.59/lb on Thursday, before edging up another cent to end Friday $.60/lb. Ethylene for July delivery in TX also posted strong gains, rising nearly $.07/lb on the week to just under $.51/lb. July financial futures ran up a nickel to nearly $.47/lb, lagging due to its weighted average including lower prices earlier in the month. The Ethylene curve was steeply backwardated as future months quote increasingly cheaper to pierce below $.30/lb by the end of the year.

Propylene trading took a back seat to Ethylene for the second consecutive week. July PGP did not change hands until Thursday when a transaction was completed at $.73/lb, a couple of cents below July spot business done the previous week. By Friday, July spot PGP futures ended at $.74/lb, below the previous week's close of $.75/lb.

The forward curve kept a steep backwardation with August PGP almost a dime under July and deferred months making their way nearly $.20/lb lower by the end of this year.

Spot Polyethylene trading improved and above average volumes changed hands through our trading desk. Domestic levels were mostly firm at lofty levels, except for Pail grade, which extended gains with a 2-cent uptick. There is still more demand for most prime than can be presently met, despite statistics that indicate that domestic supply is improving. Most prime PE grades are tough to find, but supply has been trickling in and all good Injection grade HDPE, LDPE, and LLDPE resins have been snatched up in the blink of an eye. We have participated in high volume imports of HDPE Injection and Blow Molding grades, but not film grades, where semi-finished roll stock imports reign supreme.

There has been some overall improvement in domestic Polyethylene supply conditions though, with larger processors’ needs increasingly satisfied directly from producers. There are still lingering PE production and supply issues and as soon as a Force Majeure (FM) or sales allocation is lifted, another production issue seemingly takes its place, which has helped maintain upward pressure on prices. There could be some better availability ahead from Canada as Nova lifted FM on all its PE production, including LDPE and HDPE, which had been in place for just over two months due to a cracker outage and lack of monomer. However, issues arose at another producer's HDPE production unit in Texas, which may not be back online until September. At least four other PE producers remain on FM and/or sale allocation programs.

After pushing through June contract price increases of $.05/lb for all commodity grades, suppliers are looking to extend that streak for an eighth and then ninth consecutive month. July increase initiatives of $.03 - .05/ lb are on the table, and one producer came out with another nickel for August on its HDPE resins. Polyethylene contracts have relentlessly increased 11 of the past 13 months, sans Oct and Nov, and have risen some $.60/lb along the way on the back of limited supply availability, strong buyer demand, and premium spot levels helping to pave the way.

Spot Polypropylene eased a couple cents which helped trigger healthier demand and an uptick in trading activity. Higher volume trade was seen for HoPP, both low melt and very high melts, as well as a smattering of imported Prime CoPP resins. A steady stream of Offgrade railcars again made its way through the market at increasingly higher prices, bringing additional consolidation in pricing. There has been very little domestic prime PP available in the spot market, but imported material has provided good liquidity for those in need.

A couple cents off PP is not much of a win as prices remain in the realm of record levels that have been essentially maintained since the immediate aftermath of the Feb-storm. However, processors have seemingly grown accustomed to the strong price levels which will likely largely endure for at least the near/mid-term as upstream inventories rebuild back to a collectively abundant position. In the meantime, a lightning strike took out PP production lines at a facility in Louisiana, hampering the general recovery. There was no complete timeline for the re-start at the facility, which had just lifted a FM at the onset of July. At least five other PP producers still have FM and supply allocations in place.

The lightning strike is an excellent example of vital random factors to keep in mind for the second half of this year, such as an active hurricane season, strong energy futures, electricity grids pressing capacity during summer heatwaves across the country, supply chain interruptions, and prohibitively high domestic and international freight rates. Until inventory is flush, the heat is on higher contract prices this summer, with July increases from $.03-.05/lb are on the table, in addition to the change in July Propylene Monomer, which is pointing towards a modest increase for July. PP producers have already starting stacking another nickel margin increase on for August. We are not out of the woods yet, but absent any additional production disruptions during the rest of hurricane season, this market too will eventually cycle through. 

Total Offers 8,847,857 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
PP Copo2,285,588$1.310$1.510$1.400$1.500
PP Homo2,179,864$1.190$1.410$1.300$1.400
HDPE - Blow Mold1,874,944$1.030$1.150$1.070$1.120
LLDPE - Inj851,380$1.000$1.120$1.060$1.110
HDPE - Inj529,104$.980$1.140$1.050$1.100
HMWPE - Film488,960$.910$.950$.900$.950
LDPE - Inj384,521$.980$1.100$1.010$1.060
LDPE - Film132,024$1.050$1.120$1.070$1.120
LLDPE - Film121,472$.970$1.070$.950$1.000
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