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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
October 15, 2021

Summary

Spot resin trading activity was about average relative to the last several months but remained well off the hyperactive pace seen during the first half of the year. Resin availability continued to improve with the majority of materials now accessible, and if not prompt, with just a couple weeks lead time. Average prices for commodity Polyethylene and Polypropylene resins fell by $.03/lb with some variance by grade. Market sentiment has continued to shift more negative and is now considered bearish, pushing processors with non-urgent demand off to the sidelines awaiting cheaper prices ahead. Once again buyers in need of prompt material were pleased with lower pricing yet still only picked away with limited volume orders.

Producers seem to be feeling the pressure of their bulging inventories and many public warehouses are already filled to the brim. We have seen more consistent discounting for spot material, both to enable higher export volumes out of Houston and to meet competitive offers for domestic accounts. It is highly unlikely that producers will be able to implement either of their 5 cent/lb price increases for Polyethylene and Polypropylene contracts in October, and there is certainly a case being made for a nickel or so price decrease to come through. However, do not be surprised if producers manage to hold PE contracts flat, which would be the 3rd month in a row. Polypropylene price relief is imminent with the October PGP monomer contract settlements now expected to decrease by double digits, and it remains to be seen if margin erosion will also start to set in.

While the market is not totally awash in resin, the shift in sentiment has suppliers chasing buyers as opposed to buyers chasing resin. All markets cycle and this correction was not a surprise after such an extreme and unprecedented rise in price, which saw Polyethylene contract prices soar some $.41-.43/lb in 2021 and a whopping $.65-.67/lb since the last market trough amid the COVID quarantine in May 2020. Polypropylene prices saw gains of $.54/lb and $.855/lb in the same period. As we typically see in a down leg cycle market, offers for most materials are available for material that is ready 2-3 weeks out, while premiums are still commanded and warranted for immediate availability, rewarding or at least easing the hit for those that took risk to carry on-hand inventory. This market break is not unexpected and we do anticipate further price erosion in both spot and contracts Q4, and if producers are able to liquidate enough material prior to year-end we might expect a new up leg in the market come January for Q1, though starting at lower prices than current today.

Energy futures were mixed as ongoing global demand and expected future demand pushed Crude oil prices higher while easing temperatures across the US led Nat Gas lower. WTI Crude saw a draw from domestic stockpiles this week as forecasts from the International Energy Agency (IEA) anticipate a 50,000 bbl/day increase driven by the global energy crunch. The IEA also estimated that OPEC+ is set to produce 700,000 bbl/day, below estimated crude demand in Q4, indicating demand will outpace supply. Both WTI and Brent extended gains further above the $80/bbl level. Nov WTI ended Friday at $82.28/bbl, up almost $3/bbl on the week. Dec Brent approached $85/bbl to end the week $2.47/bbl higher at $84.86/bbl. Nov Nat Gas futures tumbled to settle at $5.41/mmBtu on Friday, a weekly loss of nearly $.16/mmBtu. NGLs were higher on the week with Ethane ending just over $.02/gal higher at $.440/gal ($.186/lb) and Propane up over a penny at $1.478/gal ($.418/lb).

Monomer price direction was also mixed amid active trading into mid-month alongside hefty volumes transacting for Ethylene and Polymer Grade Propylene (PGP). Prompt Oct Ethylene prices rose with heavy interest and began the week on Tuesday changing hands in TX at $.33/lb. Prompt Oct also traded in LA on Thursday at $.40/lb, indicating the premium to TX delivery. By Friday, Oct material traded in TX within a band of $.34-.3525/lb, before the benchmark settled at $.3525/lb for a weekly gain of just over $.03/lb. Deferred months narrowed to become flat through the remainder of the year for the TX benchmark, and slightly backwardated below $.35/lb towards the end of Q1 2022. PGP also saw decent volume with prompt Oct material transacting in order at $.69/lb, $.6825/lb and $.675/lb on Monday, and at $.64/lb on Wednesday. By week-end, Oct settled at nearly $.67/lb, which reflects a weighted average for the month, losing about $.07/lb from a week earlier. With domestic spot PGP falling into the $.60s/lb and further detached from the Sep contract settlement of $.84/lb, a larger double-digit decline for the Oct contract is now to be expected. Deferred months remained backwardated as Nov PGP traded a couple of times at $.63/lb on Tuesday and at $.635/lb midweek, while Dec traded early in the week at $.62/lb. Q1 2022 PGP was also completed a few times at $.62/lb, as April ’22 deliveries and beyond all fell below $.60/lb.

Spot prices for most commodity grade Polyethylene resins shed $.01-.03/lb as the ample inventory / soft demand balance factored into further price erosion. In a relatively rare occurrence, our PE trading was outdone by this past week’s PP activity and while daily dealings were fairly consistent, total weekly volumes were not as robust compared to peak levels several months earlier. HDPE for Injection and Blow Mold, which had been some of the more difficult commodity grades to procure this year, continued to change hands more frequently as supplies improved in October. Better availability for these HDPE grades have been gradually eating away at the large premiums that have been in place since Feb/Mar. LDPE for Film and Injection were also active with good buying seen from both processors and resellers; prices for LDPE and LLDPE Injection grades were the strongest of the bunch and managed steady. Despite the decline in domestic spot PE prices over the past couple of months, some production challenges remain. Some companies are still under force majeure or allocation programs, PE maintenance outages are still planned throughout Q4, and operating rates are gradually returning to normal following the impact of Hurricane Ida in Sep which took a chunk of production offline in LA.

Polypropylene prices chunked off another $.03/lb, just one week removed from dropping $.06/lb, its deepest decline of the year. Sales picked up significantly as traders unwound positions in the face of improving supply and falling PGP costs. Completed volumes heavily favored Prime packaged CoPP and HoPP raffia, and the majority of sales were for ready to ship imported material alongside some domestic railcars. Although availability has improved, the domestic market is not overly flooded with supply. There was good availability of fresh Prime and widespec HoPP railcars as well as packaged truckloads of most grades, but sourcing higher value PP resins grades such as CoPP impact, no break and random clarified were still somewhat challenged regarding domestically produced material, while import supplies have been largely depleted by now. Exports have also been increasing again, a sign that producers see their inventories as sufficient, at least given the current cost structure.

Total Offers 13,330,068 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
PP Copo2,982,576$1.110$1.350$1.210$1.310
PP Homo2,247,656$1.010$1.230$1.110$1.210
LLDPE - Film2,069,128$.850$.990$.840$.890
LDPE - Film1,507,472$.880$1.050$.970$1.020
HDPE - Inj1,238,280$.890$1.060$.950$1.000
HDPE - Blow Mold1,104,472$.890$1.040$.970$1.020
HMWPE - Film964,920$.770$.870$.800$.850
LLDPE - Inj747,288$.950$1.110$1.000$1.050
LDPE - Inj468,276$.920$1.080$.970$1.020
 
 
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