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Weekly resin report: 'Twas the start of December, and not a buyer was stirring
Hello... is this thing on?!? It was hard to tell at times this past week, which was our slowest of the year. Although mid-week, resin trading awoke slightly from its slumber, it was only to record ho-hum daily volumes amid limited spot demand. Negative sentiment has affirmed a strong grip on the market and processors are in the midst of de-stocking, which is both seasonal as the year-end approaches, but more resultant of lofty resin prices which are now coming un-done. Offers for both Polyethylene and Polypropylene flowed freely and domestic railcars were well discounted, as burdensome upstream resin supplies weighed on the market. PE prices shed another cent, while PP chunked off $.02-.03/lb. Contract prices for both PE and PP decreased in November and seem to be setting up for similar declines again in Dec.
The major energy markets remained very active, there was high price volatility, and Oil and Nat Gas ultimately settled in opposite directions. WTI Crude Oil opened the week strong on the tailwinds of an apparent US – China trade war truce; however, gains were capped by a meeting of oil producers expressing their collective desire to cut production and better match global demand. Jan WTI moved around in a large $4.5/bbl range and settled Friday at $52.61/bbl, up $1.68/bbl. Feb Brent outperformed WTI to the upside, adding $2.21/bbl to $61.67/bbl. Nat Gas futures continued to move around in a huge range, this week it was $.40/mmBtu. While the market surged on Friday to pare losses, the Jan contract still ended the week down $.124/mmBtu to $4.488/mmBtu. Ethane dropped sharply on Monday and proceeded to rebound the rest of the week, but still ended down a net $.015/gal to $.32/gal ($.135/lb). Propane jumped on Monday, then saw some give and take along the way before ending the week at $.73/gal ($.21/lb), up $.04/gal.
Monomer trading slowed from its hyped up post-thanksgiving trading, though prices were still mostly flat. Spot Ethylene has remained pegged right at its recent level of $.20/lb, with very little deviation. Several lots changed hands at this price before a minor quarter-cent uptick came on Friday to end the week barely into positive territory. The tone for Propylene pricing remained bearish as the market still searched for a bottom. PGP saw immediate pressure on Monday morning which continued through mid-week and prices peeled off another $.015/lb to $.37/lb. The market then recovered, and by Friday, had eliminated its losses, but that is where it ended, $.385/lb. After eroding about $.20/lb in just two months some might call this steady week – a success. As a reminder, Nov PGP contracts settled down a dime at $.50/lb; current spot levels point to a similar drop for Dec.
The spot Polyethylene market began December cautiously and quietly, failing to maintain the heightened pace seen at the end of November, which had become the norm for much of 2018. Transacted volumes and overall demand were both off, with most trading chatter coming from suppliers looking to unload their warehoused materials while passing along producer railcar offers, hoping to find a buyer before responding back upstream without a sale. Processors picked away with small purchase orders, buying only as needed to fill in supply gaps, as they watched spot Polyethylene prices slip another penny. At least one producer, in an apparent effort to help stem the slide, nominated a price increase for both December and January, seeking $.03/lb and $.05/lb respectively. At this time, spot activity does not support these ambitions and many are calling for further price decreases to close the gap between ever falling spot levels and the resilient contract market, save for the $.03/lb decrease conceded in November. While record export activity was reported in October, largely due to producer direct sales efforts, incremental export sales remained challenged by both soft prices and demand overseas. We would not be surprised to see PE production throttled back in Dec as producers seek to regain pricing power in the New Year.
This past week was fairly active for Polypropylene, despite the fact that few deals were actually completed. Our trading desk fielded a healthy number of inquiries for immediate shipment, and while some orders were filled, in many cases, price expectations did not match up. Of those transactions that were completed, volume favored CoPP where prices had eroded $.04/lb this past week alone; HoPP slid a penny less. We found that many trading partners had scarcely any PP warehoused ready to go and did not want to meet the low-ball buyer bids. While there were plenty of fresh railcars offered for new shipment at workable levels, the timing on these delays created challenges – this is typical in a rapidly falling market. Nov PP contracts decreased $.10/lb, commensurate with the drop in PGP monomer; several resin producers are seeking to reduce Dec PP contracts, but to a lesser magnitude than the forthcoming drop in Dec monomer contracts. With the import Arb closed, we foresee a tightening of the supply / demand dynamic developing, perhaps early in the New Year, but for now, there are relative deals to be had for railcar quantities.