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Weekly resin report: Some processors bank on PE supply surge that will send resin prices lower

Weekly resin report: Some processors bank on PE supply surge that will send resin prices lower2019.05.22

The spot resin markets were very busy this past week, at mid-month our trading results have run nearly double the historic average. Polypropylene prices trudged another cent higher while Polyethylene prices held firm, having consolidated recent gains at these slightly elevated recovery levels. With the April PE price increase intact, producers have maintained upward pressure on the market with another $.03/lb hike on the table for May. PP resin contracts should increase in concert with the imminent jump in PGP contracts, they should rise in the vicinity of a nickel or more. While both domestic and export resin demand remains very good, continued trade-war sparring has added a level of anxiety to the international market. Consequently, Chinese demand and prices have fallen off a bit, creating the potential for softer Houston pricing, while also considering additional new production slated to come online over the next few months here in the US. On the other hand, Crude Oil has bounced back from the $60/bbl level, which provides underlying cost support to overall resin pricing. 


The major energy markets all moved higher amid more volatile sessions. WTI Crude Oil futures held the $60/bbl support level and added $1.10/bbl to $62.76/bbl, though it was off nearly a buck from the week’s peak. Brent Oil rallied a respectable $1.59/bbl to $72.21/bbl. Nat Gas futures garnered little more than a penny gain to settle Friday at $2.631/mmBtu. Ethane recouped half of the previous week’s penny loss, it ended this week at $.225/gal ($.095/lb). Propane resumed its losing ways, giving back most of the previous week’s 2-cent recovery; it went into the weekend at just $.60/gal ($.17/lb). 


    


Monomer trading was also quite active again, bids and offers were plentiful and although some large volumes changed hands, there was relatively little price change. Ethylene transactions were often concentrated in the forward months, while activity for prompt delivery was generally muted. May Ethylene finished the week flat at $.135/lb. Spot Propylene trading was busy, with both daily transactions and a high level of completed volumes seen. Like Ethylene, PGP transactions mostly took place in the forward curve which further flattened the contango, which has been subsiding for weeks. May PGP was initially pressured, but reversed course midweek and added nearly $.01/lb by Friday, ending the week at $.395/lb. Contract negotiations have yet to conclude, and the market remains volatile; considering spot action, we still expect May PGP contracts to increase around a nickel and perhaps even a cent or two more. 




Polyethylene trading was active, processors have been tapping the spot market searching for relative deals compared to their rising contract prices. Few think that the current May $.03/lb increase will take hold, but then again, not many believed the last $.03/lb increase would have been implemented in April. Overall supply is ample at a minimum, but there are certain grades that have become difficult to source, including LDPE film grades and LLDPE for injection, and both are starting to earn small premiums compared to other commodity Polyethylene resins. Downstream inventories remain below average, some processors are banking on another surge of resin supply to send the market lower again. However, others are viewing current costs as very favorable, with limited if any downside available, so some have been slowly adding to on-hand inventories. 


Spot Polypropylene trading activity remained heightened; buyers continued to access the spot market as they face a large jump in May contracts, the increase should be in the area of $.05-07/lb. The break in Polypropylene prices during the first quarter limited speculative Polypropylene imports, we are seeing very little surplus packaged material available. Spot prime domestic railcars are also fairly scarce and seem to be priced with an extra little bump considered, as some suppliers feel out the potential for a little margin expansion. Still, many processors have pushed back against rapidly rising PP prices and with some patience, have been able to negotiate a little off of excessive asking prices – we have a true and liquid market environment in play. 





Source: theplasticsexchange.com


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