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Summary
Resin activity picked up as better buying returned from what was the slowest pace of the year just a week earlier. With the increase in demand came a slight recovery in spot Prime levels, mainly in the Polyethylene sector, which gained a penny across the board. Yet another Force Majeure impacted the resin market, this time declared by Nova Chemicals, as their Corunna Cracker in Sarnia, Ontario, faced an unplanned outage, limiting feedstock monomer to regional Polyethylene plants. For those that lost count, there are now a total of 4 active FMs in place for PE. Polypropylene prices consolidated and averaged out about steady; the top end of the market trimmed as elevated PGP costs moderated more while the bottom part of the spectrum firmed as resellers' older and lower-priced inventories dwindled. This stable to slight gain snapped a two-week decline in spot resin levels, which had been brought about by cautious sentiment due to the global economic woes such as high inflation, rising interest rates and bank failures which added uncertainty to an already struggling economy. Still, even amid generally lackluster demand, the PE market seemed to resume its supply-constrained rally, and for PP, its cost-push uptrend which both began at the onset of 2023.
Spot Polyethylene volumes improved during the week as demand rose in light of another FM to hit the market. A penny uptick applied to all PE grades in our marketplace, reversing most of the previous week's losses, while putting the rally back on track. Our completed volumes were well spread among the major commodity grades this week, and LDPE for Film emerged as the top mover. Nova became the latest PE producer to declare a Force Majeure joining Formosa, Ineos, and CP Chem, which are all still on FM, even though some restarts have begun. With production disruptions galore, if demand was even average, PE prices would now be soaring, but are instead struggling to add to the Jan $.03/lb contract gains. The Feb increase fell flat and the renewed effort in March appeared to face the same fate as MTD spot market conditions, both domestic and export, have not supported the current increase; however, at least once index has now called for another $.03/lb to stick, so we will wait to see how negotiations ultimately finish. For some additonal inspiration and upward pressure, at least two PE producers have nominated a fresh nickel for April.
In the Polypropylene sector, Prime CoPP and HoPP prices ended the week steady, as PGP was largely flat, and neither resin demand nor supply saw enough change to move the needle. CoPP was the main mover across our platform, with prime selling slightly more than widespec, and while HoPP trading was more limited, buyer requests began to grow. As we have seen since Jan began, resin availability remained on the lighter side, there was a gentle stream of offgrade railcars, but prime railcars were only available by request or through forecasting into production. Resellers' well-priced warehoused resin seemed to be drying up and their asking prices had jumped along with their replacement costs; consequently buyers balked at the offers and we filled the majority of the orders from our market-making inventory and given the options, chose to not restock at this time. March Polypropylene contracts are set for another sizable increase, which will add to the $.18/lb cost-push hike already implemented in Jan/Feb, minus some margin contraction which has varied by producer. Spot PGP prices have retreated sharply from peak levels seen earlier this month, taming back early estimates for the pending increase. Late in the week, one index suggested that PGP would still see a $.13/lb increase, but with April monomer well-discounted to prompt, leaving next month vulnerable, we think that even a dime increase for March would be plenty.
Market participation was heavy in Ethylene and Propylene dealings were relatively light, overall volume was solid as prices diverged. The trading week began very quietly but gained steam with news of an unplanned outage at a Nova cracker, which has annual production of 1.8 billion lbs of Ethylene. On Tuesday, Ethylene for prompt delivery changed hands in Louisiana at $.1825/lb. On Wednesday morning spot Mar Ethylene in Texas was inked twice at $.22/lb and then once at $.21875/lb, that afternoon a deal for Apr Ethylene in Texas was booked at $.21375/lb. Over in Louisiana, deals for both Mar and Apr Ethylene were each completed at $.18/lb, along with a calendar swap. The heavy interest continued into Thursday, a couple deals for Apr/May TX deliveries were completed with a half-cent premium for nearby, April Ethylene in TX exchanged hands twice at $.22/lb, and a deal for 3Q deliveries in LA was also noted. On Friday the market saw nearly a 20% jump in spot pricing. The first Friday trade occurred early in the AM when a transaction flipping Mar and Apr deliveries was completed, prompt delivery demanded a larger $.02/lb premium. Shortly after, Apr Ethylene rallied a penny and a half and transacted three times at $.23/lb and March was bid even higher. At Friday's close spot Mar Ethylene settled just a touch below $.265/lb, a weekly gain of nearly $.045/lb or 20%. Deferred contract months also rose but were unable to keep pace and the backdated forward curve steepened.
After multiple weeks leading the monomer markets, Polymer Grade Propylene action slowed, taking a back seat to Ethylene amid lower than recent volumes. There was little interest in PGP until late Tuesday when Apr delivery sold at $.49/lb. On Wednesday afternoon a deal for 2Q PGP deliveries was completed at $.48/lb. Bids for Mar PGP were posted at $.52/lb but with the closest offers shown $.06/lb higher at $.58/lb, spot PGP interest began to wane. Apr PGP remained $.485/lb bid through the end of the week but sellers were absent and with only a handful of inquiries for future PGP deliveries the market came to rest. By the end of the day Friday, the weighted spot Mar PGP average settled slightly above $.61/lb, losing nearly half a cent during the week. Forward contract months through the end of 2023 saw good gains and the backdated curve narrowed. After several weeks of extreme spot market volatility, market movements have stalled and price stability has been restored allowing participants to digest the increased price levels. Feb PGP contracts were priced at $.50/lb. Although March's weighted average could justify as much as a $.13/lb increase before discounts, recent price erosion places spot March about a nickel below that average, and with April priced at an even larger discount, just under $.50/lb, we envision a more benign increase coming though, perhaps only a dime or even high single digits.
The Energy complex was mixed this week as Crude Oil rebounded amid easing concerns regarding the banking sector, while Nat Gas continued to drop on the back of mild weather and weak demand. Along with May shifting to the front month, WTI Crude initially extended the previous week's losses and dropped to a floor of $64.36/bbl on Monday, only to regain $7.31/bbl to establish a high of $71.67/bbl by Thursday. At Friday's close, May WTI settled at $69.26/bbl, which was up by $2.33/bbl from May WTI a week earlier. May Brent also hit a low on Monday, at $70.13/bbl, before picking up $7.30/bbl to set a high of $77.43/bbl on Thursday. By Friday's close, May Brent settled at $74.99/bbl, for a weekly net gain of $2.02/bbl. Apr Nat Gas shot up a high of $2.427/mmBtu on Monday, and lost $.30/mmBtu to $2.127/mmBtu the following day. The week finished with Apr Nat Gas at $2.216/mmBtu, down just over 12 cents from the previous Friday. NGL prices were also mixed as Ethane was down fractionally at $.241/gal ($.102/lb) and Propane gained nearly a penny to $.788/gal ($.223/lb).
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Total Offers
14,288,278 lbs
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Spot
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Contract
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| Resin | Total lbs | Low | High | Bid | Offer |
| PP Homo | 3,387,704 | $.500 | $.660 | $.590 | $.660 |
| PP Copo | 3,158,440 | $.520 | $.720 | $.640 | $.710 |
| HDPE - Blow Mold | 1,775,932 | $.540 | $.640 | $.580 | $.630 |
| LLDPE - Film | 1,425,472 | $.520 | $.600 | $.540 | $.590 |
| LDPE - Film | 1,406,760 | $.570 | $.650 | $.600 | $.650 |
| HDPE - Inj | 1,058,208 | $.520 | $.620 | $.570 | $.620 |
| LLDPE - Inj | 814,562 | $.550 | $.670 | $.610 | $.660 |
| HMWPE - Film | 665,600 | $.560 | $.630 | $.580 | $.630 |
| LDPE - Inj | 595,600 | $.620 | $.700 | $.650 | $.700 |
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