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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
November 25, 2022

Summary

Spot resin activity slowed due to the shortened Thanksgiving week, though overall trading and interest was still solid and our completed volumes did not disappoint given the 3-day work week. Once again, our railcar trading outpaced our truckload orders, as some processors have been slowly rebuilding resin stocks at these advantageous prices. The flow of offers dropped to a snail’s pace, as producer’s efforts to rebalance supply / demand through reduced production and heavy exports has been making a noticeable impact on spot resin availability. We held our levels for Prime Polyethylene and Polypropylene steady after recording a sizable decline a week earlier as one-off discounting became more recognized industry wide. We do not expect to see a big change in Nov contracts, Polyethylene will most likely roll flat again as it did in Oct; PGP contracts should nudge a cent or two higher this month, but the cost decrease should at a minimum be offset by another contraction in Polypropylene margins, leaving net PP contracts flat to perhaps a tad lower. Oct PP contracts settled late (finally in mid-Nov) with most contracts decreasing a huge $.15/lb.

The threat of a major railworker strike remains a possibility, and the supply chain and economic damages would be so massive, that we anticipate an 11th hour agreement coming together to keep the trains rolling. Still, in preparation, at least one producer notified customers that it will be able to ship until December 5, with the exception of hazardous and time-sensitive material and expects service to slow down 72 hours before a potential strike. The producer also indicated it would stop shipping those products last week, which will impact ethylene oxide, allyl oxide, ethylene and styrene. Railroads could also implement embargos on these types of shipments a week before a possible strike. Railroads have been dealing with container congestion for much of the year and this is expected to last in some areas into January. Union Pacific said its container congestion at its Chicago and Dallas yards will not clear until the end of this year. To help alleviate the bottleneck, producers have also announced a stricter position on demurrage which includes accelerated fees for long hold times; major warehouses have also taken this position to encourage quicker turnover by penalizing long-term storage.

There was a good amount of Polyethylene activity seen this week, building on recent momentum and seemingly only slowing due to the holiday. A sizable chunk of volume transacted across our platform, an indication that spot demand is healthy, at least in some market segments. Trading was well spread over commodity grades with HDPE Blow Mold and LLDPE film and injection standing out, while LDPE activity was more limited. PE producers have maintained dramatically reduced production levels, which are expected to run at least through the remainder of the year, as they work down inventory levels to the lowest levels since last December. Still, overall availability remains relatively good, albeit thinning and producers have been less aggressive with the outpouring of competitive offers than we had seen during the summer months. We have paid up a couple / few cents to secure offgrade railcars amid these tightening conditions. The more balanced supply /demand dynamic factored into the rollover for October contracts and we expect the same for November, even as new capacity is still hitting the market.

Polypropylene trading activity was somewhat unenthusiastic in the holiday-shortened week. Although our completed volumes were good, much of it was concentrated in a handful of CoPP and HoPP railcar transactions, while the typical truckload demand was a bit sparse. Still some Prime HoPP truckloads sold at seller’s asking prices. CoPP truckload supplies remain challenged, and when available, asking prices were quite elevated. The flow of offgrade railcar offers slowed, it took real effort to uncover supply to complete our dealings, and we had to pay up to get them. Several trading firms sought prime CoPP railcars to bolster their inventories, but we were unable to find properly priced material to fill the orders. A couple producers that had aggressively offered material in Oct and early Nov seemed to already line out their Nov / Dec production and did not want to participate at levels seen weeks ago. PP producers have restricted production since September to help reduce the supply overhang, but lax domestic demand has offset the effect. It could take some downstream sentiment change for processors to come back and rebuild inventories, and while some have, we have yet to see that practice in mass. PP contracts got pummeled in Oct, dropping $.15/lb, we expect a much more modest change in Nov, perhaps steady to a couple cents lower as production margin has room to shrink and catch up (or rather down) to spot levels.

Spot monomer trading scaled back during the shortened week and visible volumes were low as prices diverged. Ethylene led the way posting the majority of inquiries and solidifying most of the completed volume. The week opened Monday morning with several bids for prompt and future Ethylene deliveries but offers were scarce. Traders were unable to match up on material for delivery in the US, but a deal for Dec Euro Ethylene was completed early that afternoon. On Tuesday, transactions for spot Nov and Dec Ethylene were agreed in Louisiana, each at $.21125/lb. Over in Texas, three trades for Nov Ethylene were done with back-dated pricing of $.225/lb, and three more for 2Q ‘23 ethylene deliveries were executed at $.22375/lb. The market came to rest and by Friday afternoon spot Nov Ethylene had inched up a half-cent to finish at $.225/lb. The forward curve remains flat with Jan and Feb Ethylene just above $.225/lb.

Polymer Grade Propylene was relatively quiet taking a back seat to Ethylene. On Monday a deal for 3Q ‘23 PGP was finalized at $.35/lb, this was the only deal that came to fruition during the short week. Tuesday and Wednesday brought price drops to the market and a few bids/offers were presented, but ultimately opposing price ideas were too far apart to conduct further business. By Friday afternoon, spot Nov PGP had nicked off a little more than a half-cent settling just below $.315/lb. Many deferred contract months saw larger losses, some nearly 10%; May ’24 and beyond hacked off almost $.04/lb and now rest at $.355/lb. Nov PGP contracts have yet to be settled, but we still expect pricing to remain fairly flat to perhaps a penny higher from the Oct contract settlement of $.32/lb.

The Energy complex was mixed ahead of the holiday with Crude Oil futures dropping on the back of a higher-than-expected build in gasoline stockpiles and continued demand concerns driven by a surge in Covid cases in China. EIA data showed US gasoline stocks up by 3.1 million bbl, way more than 383,000 bbl build that was forecast. Nat Gas rose for a third consecutive week as winter weather across the US and colder temperature forecasts kept demand strong. Jan WTI dropped to a low of $75.27/bbl on Monday only to rebound $7.09/bbl to a high of $82.36/bbl the following day. By Friday, Jan WTI had fallen back to settle at $76.28/bbl, a weekly net loss of $3.83/bbl. Jan Brent futures followed suit and closed the week at $83.63/bbl, down almost $4/bbl. Dec Nat Gas futures made its low on Monday at $6.15/mmBtu, then soared $1.45/mmBtu through Wednesday to a high of $7.60/mmBtu. Dec Nat Gas finished Friday at $7.02/mmBtu, up a strong $0.72/mmBtu on the week. NGLs were mildly mixed with Ethane fractionally higher to $.406/gal ($.17/lb) and Propane down less than a cent to $.856/gal ($242/lb).

Total Offers 14,875,644 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
HDPE - Blow Mold2,584,600$.490$.620$.540$.590
PP Homo2,122,668$.490$.630$.510$.580
LDPE - Film1,994,576$.560$.670$.580$.630
LLDPE - Inj1,977,748$.550$.690$.590$.640
HDPE - Inj1,851,864$.490$.610$.530$.580
LLDPE - Film1,532,760$.490$.600$.520$.570
PP Copo1,444,576$.530$.720$.560$.630
HMWPE - Film970,024$.480$.585$.490$.540
LDPE - Inj396,828$.580$.700$.630$.680
 
 
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