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Weekly resin report: Upstream PP inventories at their lowest point in 15 years
The spot resin markets began July moderately busy, there was a nice flow of processor buy orders through mid-week, some seemingly pent up until this start of the third quarter. Though the supply of fresh railcars was expectantly light, some cars sold and there was ample packaged material offered by resellers to provide good market liquidity; consequently, most realistic deals came to completion with relative ease. The market then fell silent on Thursday as we celebrated our Independence Day here in the USA. There was nary a message received on Friday the 5th, other than the hundreds of Birthday wishes – OMG, I’m now 50, but I still feel so young - like only 48 or so!
The major energy markets were mixed this past holiday-interrupted week. WTI Crude Oil briefly pierced above the $60/bbl level on Monday, but that daylight was short-lived and prices fell from there. The July futures contract ultimately lost a net $.96/bbl to settle Friday at $57.51/bbl. Brent Crude also slipped, but only eased back $.51/bbl, ending the week at $64.23/bbl. Nat Gas continued to recover adding $.11/MBtu to finish at $2.418/MBtu, a clean quarter gain in the past two weeks. Ethane prices tanked, there is just too much material and not enough outlets, prompt prices eroded a massive $.035/gal, more than 20%, to just $.133/gal ($.056/lb). Propane shed a sizable $.025/gal to $.47/gal ($.133/lb).
The monomer markets were mostly quiet as expected for the first week of the quarter; visibly transacted volumes were low and prices edged just slightly higher. Ethylene saw a few scattered bids and offers which floated July prices up a scant quarter cent to $.1375/lb. Propylene, quite in contrast, opened the month with a BANG! as good demand lifted prices nearly $.03/lb by Tuesday’s close. Post 4th of July festivities, July PGP maintained its upward pressure and finished the week just shy of $.37/lb. The forward curve moved in lock-step to continue its contango and the June 2020 peak nestled itself comfortably back above $.40/lb. Spot PGP pricing currently supports a $.03/lb increase for July PGP contracts, which could be a moving target.
Spot Polyethylene trading was better than expected considering the holiday shortened week, we were pleased with the order flow especially having coming off a slow June. Spot PE prices had been sliding, but they held firm as July began. There is still a high level of uncertainly regarding June contracts - some claim a $.03/lb decrease is at hand, while others remain flat, and no one sensibly sees the nominated $.03/lb increase actually taking hold. Indeed there were some extra special sharp deals available as the 2nd quarter came to an end, but the market will have a fresh restart when participants return after a 4-day holiday weekend. While incremental export sales have recently been challenged by negative sentiment and sluggish demand, much of the lauded new production has been consistently placed offshore and this trend should continue to grow to provide underlying support to the US domestic market.
Spot Polypropylene trading shone brightly as July began, a number of deals came to fruition and prices edged a half-cent higher. Volatile upstream monomer costs have kept market participants on their toes, swinging monthly contracts both up and down. Right after the recent June $.035/lb decrease, PP resin prices, coat-tailing PGP monomer costs, seem to be pointing back higher for July - what a quick reversal, yet again. The spot market does not feel extremely tight and most materials can be found, especially at the right price; however, upstream PP inventories are actually the lowest since we began keeping records almost 15 years ago. PP exports have been moving out at a healthy clip, soaking up mostly low end material and also some Prime to Latin American destinations. With the recent PGP move higher and other listed factors, we are now at a minimum neutral and leaning towards a slightly bullish tone.