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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
May 13, 2022

Summary

Spot resin trading picked up substantially, which was certainly welcomed following a lackluster first week of May. However, the market lull had initially continued through Tuesday and the loss of upward pricing momentum coupled with softer monomer costs dragged our Polyethylene and Polypropylene prices down a cent to start the week. It was the first weekly decline we have seen in our marketplace since December 2021. Delayed railcars then spurred aggressive buying from both resellers and processors who scooped up some 60 truckloads of packaged resin to cover their prompt needs. Undeterred by their inability to secure the $.06-.07/lb increase in April, PE producers remained steadfast in their intent to implement the increase in May while also pushing back their next $.06-.07/lb increase until June. Considering the flat April settlement, PE contracts are up $.04/lb so far in 2022. Polypropylene producers will also give their $.06/lb margin enhancing increase another shot in May and a nomination to increase June contracts has emerged too; April PP contracts followed PGP monomer down a cent in April, leaving PP contracts up a net $.12/lb so far in 2022.

The Energy complex was mixed as global supply / demand concerns stemming from geopolitical and economic issues, and the upcoming summer driving season in the US, caused rare diversion in WTI and Brent Crude Oil Markets. June WTI firmed for a third straight week, while July Brent prices declined for the first time in three weeks. Meanwhile, Nat Gas posted a moderate loss following a 76 BcF injection into domestic stockpiles alongside a forecast for more cooler seasonable weather. June WTI opened Monday at $110.43/bbl and dropped from there to reach the midweek low of $98.20/bbl before reversing course again. By Friday, WTI had rebounded to reach $110.64/bbl and then eased a tad to settle at $110.49/bbl for a weekly gain of $.72/bbl. July Brent also set a high on Monday at $113.22/bbl and dropped to a low of $100.93/bbl on Wednesday. By Friday, Brent had regained ground, but could not quite erase the losses and closed the week at $111.55/bbl, down a net $.84/bbl. June Nat Gas peaked on Monday at $8.29/mmBtu but quickly gave way, chunking off a huge $1.86/mmBtu to a weekly low of $6.43/mmBtu on Tuesday. Nat Gas rebounded through Friday and closed at $7.66/mmBtu for a weekly drop of $.38/mmBtu (-4.72%). NGL levels lost ground as Ethane finished at $.577/gal ($.243/lb) down a good $.023/gal while Propane dropped roughly $.027/gal to about $1.25/gal ($.353/lb).

Monomer market activity picked up after a quiet week and visible volumes were a bit above average as Ethylene and Polymer Grade Propylene (PGP) prices both moved lower. Ethylene took the lead and opened Monday with immediate market interest for May and June delivery. Prompt Ethylene for TX delivery changed hands at $.285/lb a total of five times on Tuesday, while Ethylene for LA delivery transacted twice at $.32/lb, showcasing a $.035/lb premium between the two Gulf Coast regions. June monomer in TX sold at $.2825/lb on Wednesday. May Ethylene in TX then traded slightly lower at $.28/lb on Thursday and Friday, where it closed out the week, down nearly $.03/lb (-9.4%). The forward curve beyond June fell in tandem and remained in slight contango through December, resting just below $.29/lb.

PGP began the week with strong selling interest as PP producers continued to run reactors at reduced rates, so prices retreated from the start. Prompt May PGP lopped off more than $.03/lb on Monday when it traded at $.565/lb and a steady flow of bids and offers pelted the May market through Friday; however, heavy completed volumes were elusive and the prompt PGP weighted average ended the week at $.5669/lb, for a net loss of nearly $.0325/lb. Deferred month trading was more active with June, 3Q, 4Q, and even 1Q 2023 PGP all trading at $.55/lb during the week, narrowing the backwardation of the forward curve by as much as $.03/lb. April PGP contracts had previously settled at $.71/lb, which was only down a penny, so a sizeable decrease for upcoming May PGP contracts is imminent; based on current spot levels, it could be justified at more than a dime, but some are already suggesting a more moderate drop could be forthcoming.

Polyethylene activity and completed volumes ramped back up as the week wore on, though pricing did not recoup the penny lost on Monday. The small spot price drop in PE does not necessarily mean price relief is on the way since producers continue to push for contract price increases for May and June as high energy and transportation costs persist. While offgrade railcars still flowed, prime domestic railcar offerings were again limited and producers were generally asking the full $.06/lb increase. LLDPE and LDPE Film grades dominated as the biggest movers across our marketplace with solid demand seen from both US and Mexican buyers. Several large groups of HDPE for Injection also sold export with some Blow Mold sales also sprinkled in.

Initial April estimates indicate that Polyethylene production was trimmed to about 87% of capacity, but the 230 million fewer lbs made were mostly offset by lower sales. While exports in April still generated about 35% of total PE sales and ran about 9% more than the trailing 12-month average, they were well off the near record shipments seen in March. With Houston warehouses still packed to the brim and more than 8 billion lbs of additional capacity still expected to come online later this year, incremental export pricing will need to become more competitive to other international regions to boost volumes and maintain a fairly balanced supply /demand dynamic in the US. Until then, there are price increases on the table and we have geopolitical and economic concerns to contend with, while also considering logistics constraints and upward pricing pressure brought on by strong demand, alongside rising energy and operational costs.

Polypropylene activity was soft at the start of the week and prices eased $.01/lb on the heels of lower feedstock costs; however, resin trading picked up during the balance of the week. While it was our strongest PP sales week in more than a month, we again chose to exercise caution as we peeled off some of our market making inventories while closely monitoring supply chains and the geopolitical landscape. Our completed volumes were well spread out with Prime HoPP Raffia as the biggest mover, followed by HoPP mid-high melt. Though there was good demand for high impact and No Break resins, CoPP sales did not hold pace, partly due to the lack of competitively priced material. As in Polyethylene, prime railcars were scarce and expensive while well-priced offgrade railcars were more available. The import arb is open and some relatively light exports are streaming in, though nowhere near the volumes seen a year ago.

Meanwhile, early April estimates showed Polypropylene operating rates below average, while domestic and export sales were about normal, which resulted in a small draw from inventory as producers continue to juggle volatile input costs, several supply chain challenges, and inflationary pressures impacting the economy. This comes as producers are still seeking a $.06/lb margin enhancing increase for May contracts, to somewhat offset a potential double-digit decrease in the upcoming May PGP contract. A lone producer has also announced its intention to implement a margin enhancing increase of $.05/lb in June. The price initiatives also come as one producer remains on PP force majeure, while two others are on sales allocation programs, and we are just a couple weeks away from the start of hurricane season.

Total Offers 13,002,226 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
PP Copo2,340,876$.960$1.150$1.020$1.120
PP Homo2,212,760$.900$1.080$.920$1.020
HDPE - Blow Mold1,730,208$.740$.890$.800$.850
HDPE - Inj1,640,944$.720$.870$.800$.850
LLDPE - Film1,322,920$.800$.930$.830$.880
LLDPE - Inj1,212,208$.810$.920$.840$.890
LDPE - Film1,195,932$.820$.930$.860$.910
HMWPE - Film814,350$.770$.830$.760$.810
LDPE - Inj532,028$.860$.940$.880$.930
 
 
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