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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
November 26, 2021

Summary

Commodity resin trading remained lackluster in this past Thanksgiving shortened week; our trading desk saw solid activity and trading results, but completed volumes were stunted given just the 3-day week. Negative market sentiment prevailed amid bearish fundamental supply / demand pressure as upstream resin supplies have grown and spot availability has become more plentiful. Spot prices for both Polyethylene and Polypropylene have been consistently whittled down over the past several months and while downward pressure persisted, all PE & PP grades managed steady this past week. The general market belief is for continued pricing softness ahead. As such, most of our order flow continued at minimum truckload levels, though some larger orders were also secured as some processors sought to line out their resin supplies through the end of Dec and some into Jan. The decline in Houston export prices has piqued export demand from international traders, and while incremental volumes are transacting, and mostly to the south, further discounting is still needed to divert high volume demand from other regions.

The current oversupplied situation has led to another month of price relief as Polyethylene contracts look to lop off a second straight monthly nickel in Nov, many believe a third $.05/lb decrease will be forthcoming in Dec. Polypropylene contract prices are on their way to a third straight monthly decline in Nov, following direction from PGP contract levels likely to see a commensurate decline of $.09-.10/lb. This would bring the 3-month drop into the low-20-cent range, and it seems that there could be another leg lower in Dec. It will be interesting to see if resin producers are able to liquidate enough surplus inventory by the end of the year to regain pricing power, though it is starting to seem that the goal of sometime in the first quarter might be a better general call timing-wise. Only time will tell.

Energy futures were widely mixed as Crude Oil futures posted a fifth consecutive weekly loss, while Nat Gas extended its rally for a second straight week. The decline in WTI and Brent came as a new COVID-19 strain detected in South Africa sparked a fresh batch of concerns over decreased travel and potential lockdowns, which could impact demand. This coupled with the eventual release of oil from the strategic reserve spooked the market.

Consequently Jan WTI Crude Oil futures chunked off a huge $7.79/bbl, 10%, to pierce below the $70/bbl mark for the first time in over two months, it ended Friday at $68.15/bbl. Jan Brent saw similar losses and settled the week at $72.72/bbl, down $6.17/bbl. Meanwhile, Nat Gas futures revved up, fueled by stronger demand expectations prompted by colder temperatures. Dec Nat Gas futures closed Friday at $5.45/mmBtu, it was a strong weekly gain of $.38/mmBtu. NGLs moved higher as Nov Ethane rose fractionally to $.403/gal ($.170/lb) while spot Propane jumped a couple of cents to $1.275/gal ($.360/lb).

Downstream Monomer prices were also mixed alongside limited activity during the holiday-shortened week as Ethylene trended lower and Polymer Grade Propylene rallied a bit. Spot Ethylene trading was generally quiet during the week and by Friday, the Nov TX benchmark ended at $.3213/lb, down a couple of cents. Deferred months remained backwardated into the low $.30s/lb through Apr and were more discounted into the high-$.29s/lb level further out. The PGP market was slightly more active and Nov PGP, as a weighted average, ended Friday at $.62/lb, posting a fractional gain. The forward curve for PGP remained backwardated through Dec, which changed hands on Monday at $.565/lb. By end-week Dec PGP finished at $.584/lb, with forward months showing a slight contango into the high $.58s/lb through next year. With less than a week left in the month, current spot levels have positioned Nov PGP contract settlements for another large decline, likely to be in the range of $.09-.11/lb.

Although domestic Polyethylene pricing was flat, trading was still fairly active in the Thanksgiving shortened week. Commodity Film grades of LDPE and LLDPE were the biggest movers in terms of volume, followed by HMW for Film and HDPE Blow Mold. Lower volume commodity resins like LDPE and LLDPE Injection maintained the strongest premiums as availability is improving slowly. Despite a flurry of Film PE changing hands during the week, some Film and Pipe grades are somewhat tight following a Force Majeure in TX earlier in the month. The reseller community has maintained limited uncommitted quantities of material on hand, so prompt premiums remain; however, since domestic PE railcar availability has improved, most grades are readily available with a 3-week notice.

Including Nov, PE contracts have now dropped a dime in 2 months, catching up (down) to spot levels which have led the down leg of this cycle. As we said earlier in the month, we feel the market has more downside ahead though we have already begun to lightly restock our depleted market making inventories, albeit very slowly.

Polypropylene trading activity was not as robust as Polyethylene, as growing supply and better availability kept patient buyers on the sidelines, sensing cheaper prices ahead. There was a strong flow of mostly offgrade and some downgraded prime domestic railcars in the spot market at nicely discounted levels, those in need of material welcomed the favorable prices. Still, high flow HoPP and CoPP grades remain relatively tight following a Force Majeure declared earlier this month and command a premium, with pricing generally still above $1/lb. Additional inventory strain is expected in Dec as one PP supplier is taking a planned maintenance turnaround at its TX facility. The overall downtrend in pricing, along with falling monomer costs, is translating to another sizable decrease in Nov PP contracts which brings the 3-month relief to more than $.20/lb. Most importers have largely depleted their uncommitted PP stocks and high freight costs and logistical delays continue to keep PP imports from moving into the US. While we do foresee some additional weakness ahead, we do advise keeping enough material on hand as sustained low imports could lead to categorically short supply as it did before weather-related disruptions impacted the market earlier this year.

Total Offers 14,587,576 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
HDPE - Blow Mold2,183,680$.800$.920$.830$.880
HDPE - Inj2,045,864$.760$.890$.810$.860
PP Homo1,961,128$.920$1.080$.970$1.070
PP Copo1,881,312$.930$1.210$1.070$1.170
LLDPE - Film1,600,944$.740$.880$.720$.770
LLDPE - Inj1,488,116$.860$.970$.860$.910
HMWPE - Film1,410,944$.730$.790$.700$.750
LDPE - Film1,296,944$.855$.925$.830$.880
LDPE - Inj718,644$.830$.930$.900$.950
 
 
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