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Weekly resin report: It’s a buyers market, as PE, PP prices lose ground
Spot resin trading reduced to average volumes as negative sentiment, largely due to weak energy and feedstock costs, particularly in the PP chain, has taken a stronger grip on the market. Nearly all grades of Polyethylene and Polypropylene moved lower, typical losses were $.01-.02/lb, with offgrade lots taking a larger hit. Material availability increased across the board, as resellers sought to sell their uncommitted stocks and passed along unneeded railcar offers in an effort to trim inventories. PE producers, who have amazingly held contract prices at elevated levels even as spot slides, aim to at least maintain with an average increase of $.03/lb on the table for Nov. PP producers will look to gain some margin as they will imminently decrease Nov contracts, but try by a lesser magnitude than their feedstock cost savings.
The major energy markets were widely mixed amid heightened volatility, as Crude Oil officially entered a bear market (down more than 20% from its high), while Natural Gas prices soared. WTI Crude Oil prices continued to erode; the December futures contract lost ground every day last week and traded below $60/bbl before rebounding a tad to end the week down a net $2.95/bbl to $60.19/bbl. Likewise, Brent Oil saw similar losses and finished the week at $70.18/bbl, down $2.65/bbl. Nat Gas established its low on Monday, which at that, was already up $.15/mmBtu, it waffled around mid-week, and sprinted higher again on Friday. The total weekly gain for the Dec futures contract was a massive $.435/mmBtu, 13%, and it went into the weekend at $3.719/mmBtu. Ethane prices stabilized after a series of weekly losses, it ended the week unchanged at $.31/gal ($.13/lb). Propane prices peeled back further, dropping a large $.085/gal to $.73/gal ($.207/lb).
The monomer markets maintained their respective trends last week with Ethylene tracking modestly higher and PGP continuing its relentless decent. November Ethylene opened firm Monday morning, material changed hands up a cent at $.205/lb midweek, then gave back half its gains, to finish Friday at $.20/lb. The $.02/lb premium for Ethylene in Louisiana is still intact. Propylene was a bit quieter; on Monday, sellers hit the bids and Nov PGP traded at $.45/lb, down a penny and held there for the balance of the week. Oct PGP contracts had rolled flat at $.60/lb and given the typical relationship between spot and contract, we would now estimate that Nov contracts could decrease as much as $.13/lb. As the market remains volatile, this estimate could continue to change until negotiations are complete.
Spot Polyethylene trading was again a bit sluggish this past week, taking a breather from the furious pace of the past few months. The market was not anemic, as an historically average volume of material changed hands, just a tad disappointing as the Thanksgiving holiday later in the month could also crimp activity. Overall trader to trader dealings were rather muted, with most of the chatter coming from suppliers looking to move uncommitted warehoused inventory. Fresh railcar offers did begin to show later in the week and almost all Polyethylene grades lost a penny, except for still snugly supplied HMW for film, which held its level. With prices giving back what they earned in the previous week the gap between contract and spot prices remains quite wide. Even so, an average $.03/lb price increase is nominated for November PE contracts, although implementation seems unlikely at the moment. While PE exports remained very strong in October, above 1.25 billion lbs, as Crude Oil tumbles, and international traders reduce target bid prices, incremental exports through the secondary market are challenged.
Polypropylene trading was quiet during the first part of the week as processors reduced their purchases, opting to work down inventories and wait for lower prices ahead. Those in need of material were pleased to see cheaper deals already entering the spot market amid increased availability for both HoPP and CoPP resins. Many domestic railcars, some prime but mostly offgrade, were offered anywhere from $.03/lb -.05/lb lower than the previous week. Spot prime truckloads for immediate shipment are still holding on to their premiums, which is typical and fair in a falling market to buyers seeking single loads to hold them over while they search for lower railcar pricing. In contrast from previous weeks, we saw increased availability of CoPP No Break and Random Clarified resins. Prime HoPP Raffia remains tight. We expect PP contracts could decrease at least $.10/lb, as feedstock costs decrease while producers also seek some margin expansion.