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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
September 30, 2022

Summary

Spot resin trading was decent this past week though completed volumes tallied slightly below average as buyers and sellers closed out September. The slower trading activity came as market participants monitored Hurricane Ian’s impact on Florida, far removed from the Texas-Louisiana Gulf Coast's refining / petrochemical / resin infrastructure. Hurricane season officially ends on November 30, leaving enough time for another major storm to hit vulnerable production; there are new storms brewing out in the Atlantic, but nothing that will threaten gulf production in the next week or so. The somewhat limited trade flow also came with mixed price direction as Polyethylene held steady for a fifth consecutive week while Polypropylene dropped yet again for a seventh straight week. There were just a few fresh prime PE domestic railcars offered and most PE export offers had already dried up for the month. PP offers continued to come, and there was a heavy flow of offgrade railcars and producers were eager to drop spot Prime prices as they sought to line out their 4th quarter reactor time.

This clear disconnect between PE and PP pricing highlights a fundamental difference in producer efforts to manage the still over-supplied situation. We have seen PE producers restrict production while leaning heavily on the export market to trim down inventories from record levels. To a certain extent they have been successful reducing their resin stocks and stemming the slide in already well-discounted spot pricing, even as contracts still come down. On the other hand, Polypropylene producers actually ramped up production in July and August, growing inventories to near record levels just as new production capacity had started in Canada. PGP monomer prices did drop substantially in September, which is a sign that PP reactor rates have finally been cut, but the decrease train had already left the station. PP prices have been in free-fall, and many buyers just want to stay out of the way. If indeed PP rates have been cut hard, it could still be some time before the surplus resin is soaked up, but it would be a big step in the right direction for producers who have seen their substantial margins garnered in 2020/2021 erode away over the past several months.

Polyethylene was once again the more dominant resin to change hands in the market and across our trading platform. Our PE prices also stayed flat as the lower end of the offgrade market firmed for another week while the top end of the prime market continued to trim down bringing a tighter range in pricing throughout the marketplace. Most spot trading was split between HDPE and LDPE grades, which have seen somewhat tighter availability, while LLDPE remained more plentiful with fewer spot needs filtering into our platform. PE has also tightened up a bit down south subsequent to a producer in Mexico reporting its crackers and derivative plants were offline due to an ethane pipeline explosion. Polyethylene exports remained good, but also hampered by competitive international offers as well as the rapidly rising US dollar, which makes Houston pricing seem more expensive when converted into a foreign country’s native currency. Producers have had better results cutting PE inventory than PP, evident with the nearly 135 million lb drop seen in August stockpiles. PE producers have also cut operating rates in September and are expected to continue reducing rates for the remainder of the year. The drop in inventory and run rates come as producers seek to regain pricing power, there are $.10-.12/lb worth of increases nominated through the end of October, but mostly seen as a hedge against a potential disruptive hurricane. Even with stable spot pricing for the past few weeks and lower run rates, an increase for September contracts will not happen, as a decrease of $.03-.06/lb is most likely to confirm.

Polypropylene trading was outright slow as a tsunami of resin continued to flood the market while buyers mostly hung out on the sidelines and essentially teased suppliers with ever-dropping bids. Weak demand from a slowing economy highlighted the large overhang of inventory and continued to apply downward pressure on spot and contract prices. Prime HoPP and CoPP dropped another penny as we closed out September, bringing the month’s rout to $.11/lb for HoPP, while CoPP lost some of its premium to bring the months losses to a steep $.14/lb. PP offering lists were long and availability more than plentiful, providing buyers with comfort that prices would not shoot higher any time soon. We are however, seeing signs that production has been cut in September, this includes a disproportionate amount of offgrade material and a steep drop in spot monomer prices as less monomer is consumed to make resin. If so, producers will start Q4 with operating rates much lower compared to the previous quarter as they work down inventory levels following the roughly 275 million lb increase seen in July / August. In the meantime, PP contracts were estimated to settle down $.08/lb cents for Sept, which would include a cost-related decrease and a reduction in margins, following the $.05/lb decline in PGP. Unless something changes, the continued decline in spot monomer prices following the drop in the Sept PGP contracts will bring another sharp decline in October PP contracts. Also keep in mind the additional PP capacity that is still set to come online in Louisiana before the end of the year, which will undoubtedly provide extra downward pressure on the already saturated market.

Prices in the monomer markets continued to leak lower as participation was more energetic though completed volumes only came in about average. Ethylene saw a steady flow of bids and offers for material in both Louisiana and Texas, but overall completed volumes were a tad disappointing. The first transaction was noted on Tuesday afternoon as a deal for 2H’23 deliveries in TX was executed at $.21/lb. Late on Wednesday, an agreement for Oct Ethylene was finalized at $.195/lb for the same location. Traders switched delivery zones Friday morning, and a deal for Sept Ethylene in LA was brokered at $.195/lb before closing the week. By the end of Friday, spot Sept Ethylene sliced off just over three-quarters of a cent, dipping below $.20/lb for the first time since Nov’20. Oct Ethylene, which becomes the front month next week, finished Friday just above $.20/lb. The normalized contango widened, and many back-month contracts saw slightly more than half-cent gains.

Polymer Grade Propylene exhibited heftier market action than Ethylene and posted the majority of the overall completed volume. The first deal came Monday afternoon when traders booked 1H’23 PGP deliveries at $.3675/lb. On Tuesday, Oct PGP exchanged hands at $.345/lb and then twice at $.3475/lb. Wednesday, the heaviest traded day of the week, saw a deal for 2Q-3Q deliveries inked at $.38/lb, a transaction for 1Q PGP deliveries completed at $.36375/lb, and then at $.35/lb. Traders also swapped Oct PGP ownership three separate times at $.3275/lb, followed by deals for 2Q-3Q deliveries executed five more times at $.37/lb. Friday afternoon brought a couple more executions for Oct PGP at $.32/lb and one final deal involving 2Q-3Q deliveries completed at $.36/lb. The Sept PGP weighted average nicked off almost $.005/lb during the week and settled just north of $.38/lb. Forward-month Oct PGP ended Friday considerably lower at just over $.32/lb, down a few cents on the week. Like Ethylene, deferred PGP contract months saw slight price increases helping to widen the contango, Sept ’23 and beyond now rests at $.39/lb. Also this week, market participants finalized the Sept PGP contract settlement at $.44/lb for a $.05/lb drop from August but the drop was a couple cents less than expected based on spot pricing.

Energy futures were mixed with WTI and Brent rebounding after a 4-week slide as traders weigh a potential 1 million bbl/day production cut ahead of an OPEC+ meeting on October 5th. Nat Gas futures were down on the week as Hurricane Ian dampened demand and moderate temperatures across the rest of the US also kept limited buying interest. The Nov WTI contract set the week’s low on Monday at $76.25/bbl, only to pick up $6.69/bbl to establish a high of $82.94/bbl on Thursday. By Friday, Nov WTI had come down some to settle at $79.49/bbl, but managed a $.75/bbl gain from the previous Friday. Nov Brent followed the same direction and hit a low of $83.63/bbl on Monday, then jumped back up by $6.48/bbl to a high of $90.11/bbl on Thursday. Pricing came off a bit on Friday and closed at $87.96/bbl, up just over $1.80/bbl on the week. The Nov Nat Gas futures contract took a different approach and hit a weekly high on Wednesday at $7.24/mmBtu before dropping to its low of $6.56/mmBtu the following day. Nat Gas rebounded some by Friday and closed out the week at $6.77/mmBtu, down just over $.06/mmBtu. NGLs extended their losses for another week as Ethane was down fractionally to $.463/gal ($.195/lb) and Propane also slid slightly to $.993 ($.281/lb).

Total Offers 15,480,840 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
PP Homo2,289,036$.550$.720$.620$.690
HDPE - Inj2,164,140$.580$.690$.620$.670
PP Copo2,053,496$.600$.790$.710$.750
LLDPE - Film1,929,588$.620$.710$.650$.700
HDPE - Blow Mold1,870,208$.620$.720$.620$.670
LLDPE - Inj1,759,496$.610$.740$.670$.720
LDPE - Film1,570,484$.635$.750$.690$.740
HMWPE - Film1,165,656$.560$.645$.570$.620
LDPE - Inj678,736$.660$.760$.710$.760
 
 
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