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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
May 15, 2020

Summary

Spot plastics trading continued to improve, demand was much better as an increasing number of temporarily shuttered manufacturing facilities returned to operation, requiring resin to run. Trade flow from both buyers and sellers was fluid this week and our transacted volumes rivaled the average tally seen during the strong first quarter of 2020. Recovering energy and feedstock costs have added some fuel to the fire, aiding market sentiment which has been shifting from fiercely negative to somewhat positive. Producers have been doing their part to maintain supply/demand balance by reducing resin production to keep an overly burdensome inventory overhang from developing. They also reacted quickly to ratchet down pricing as needed to maintain historically high exports. Now that the market has started to return to a more normal state, Houston Polyethylene prices have lifted a couple cents and the domestic $.04/lb April decrease could be the total contract relief afforded downstream. Although May is still in play, a number of producers have already nominated a $.04/lb increase for June. Polypropylene contracts had shed a deuce in April while firmer monomer has been dashing hopes for an additional decline in May.

The major energy markets maintained their volatile ways, trading in as much as a 20% range, while prices ultimately settled in opposite directions. WTI Crude Oil rolled to July and continued its incredible recovery rally ever since the May futures contract plunged deep into negative territory amid fears of insufficient storage capacity, what a difference a month can make. July WTI futures snugged up to $30/bbl, but did not breach the psychological resistance level, it ended this week at $29.52/bbl, up $3.35/bbl. Brent Oil did not fall as much as WTI did last month and has lagged a bit on the rebound, July Brent gained $1.53/bbl to end the week at $32.50/bbl. Nat Gas futures also rolled to July and failed to hold the $2 level, losing a hefty $.244/mmBtu to close Friday at $1.833/mmBtu. NGLs rallied further, building on previous gains. Ethane added $.018/gal to $.218/gal ($.092/lb). Propane soared almost a nickel to $.423/gal ($.12/lb).

Activity quieted down in the monomer markets, volume was a bit below average and prices were mixed. Ethylene saw good trader interest early in the week and prompt material changed hands in Louisiana, while Ethylene in Houston saw deals completed for future deliveries. Bids and offers continued to pepper the market through midweek, but prices were too far apart to visibly complete voluminous deals. On Friday, traders turned their attention to June and several transactions were executed at a tad above $.12/lb. The rest of the market tagged along and at the end of the day May Ethylene was pulled higher to nearly $.12/lb. The deferred months saw larger gains, steepening the forward curve contango which now peaks at $.16/lb for the 4th quarter of 2021. Propylene remained rather steady throughout the week. Participants focused mostly on prompt May where multiple deals were finalized at $.23/lb, with a few transactions for future deliveries also seen. The PGP curve is also in contango with prices reaching $.285/lb by the end of 2021. Friday saw prompt prices pull back a tad and May PGP settled around $.225/lb. Current spot levels would indicate no significant change for upcoming May PGP contracts.

The Spot Polyethylene market continued to gather steam and approached pre-pandemic activity levels as more of the US began to reopen from stay at home orders. Our trading desk was once again busy working the growing number of sourcing requests that came to our platform and transaction levels reached the realm of our 2019 averages. Spot pricing had a very firm undertone and the low end of the spectrum cleaned up, though it was not enough to move the needle and our prices held flat across the board. Although truckload orders still dominated over our railcar sales, the feeling of normalcy seemed to return and the deal flow felt natural; some customers bought more than their normal volumes taking advantage of these especially low prices. On the supply side - the market changed quite quickly from very loose to fairly tight after huge quantities of resin moved directly into the export abyss. So many export orders were booked that container space to Asia is already very limited until July. These huge export sales, nearly 2 billion lbs in April, representing about 42% of total PE sales, soaked up spot supplies and several producers claim to be sold out of many grades. After 5 months of upstream resin inventory builds, producers collectively pulled down around 270 million lbs in April. Given these comeback conditions, and the fresh $.04/lb increase nominated for June, it would be surprising to see another decrease come out of the contract market in May.

Spot Polypropylene trading was good, but not great, demand lagged a tad and there was sufficient supply to meet our incoming resin requests. Sectors of the Polypropylene market are still slow, but automotive manufacturing facilities are poised to re-open which should enable fresh demand. The reseller community still has some inventory to shed and few are excited to procure more material to just add to their PP stocks, which has likely contributed to the overall slack buying. While firming monomer costs point to a likely rollover for May PP contracts, spot prices for both HoPP and CoPP remain slightly discounted, presenting good opportunities. As time ticks and more manufacturing resumes, we believe the market will work through the supply overhang, which is not too large. As we saw a quick shift in Polyethylene supply/demand dynamics, these markets could change very quickly. For now, there are still some sharp deals out there.

Total Offers 15,900,816 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
LLDPE - Film3,411,440$.310$.410$.320$.360
PP Homo2,306,564$.370$.460$.400$.440
PP Copo2,158,484$.390$.480$.420$.460
HDPE - Inj2,103,312$.320$.400$.320$.360
HDPE - Blow Mold1,707,036$.310$.390$.320$.360
HMWPE - Film1,363,656$.320$.390$.340$.380
LDPE - Film1,135,932$.390$.495$.460$.500
LLDPE - Inj975,288$.400$.460$.400$.440
LDPE - Inj739,104$.400$.480$.420$.460
 
 
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