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Weekly resin report: New surge of PE resin may be around the bend
Spot resin continued to transact at a rapid pace. Completed volumes remained high and again favored Polyethylene over Polypropylene. There was good activity spread among all commodity resins and film grades again reigned supreme. Most Prime materials were accessible at a fair price so transactions were relatively easy to complete. Nicely discounted offgrade deals also came and went, snapped up by savvy buyers. Polyethylene contracts are rolling flat in February; there was initially a $.06/lb nomination, it next split into 3-cents for each Feb and Mar, and then just faded to flat. Processors might call steady a win, while producers can also be glad to hold their ground, well, at least officially. PP contracts are decreasing this month, but it seems just a penny, which would be considered light and could keep downward pressure on the market for March.
The upstream energy markets exerted strength and mostly settled in positive territory. WTI Crude Oil maintained its upward momentum and the April contract ended the week at $57.26/bbl, up $1.28/bbl. Brent Oil added just $.87/bbl to $67.12/bbl, shrinking the spread back down to almost $10/bbl. Nat Gas bounced back a bit more, rising almost a dime to $2.717/mmBtu. Ethane finished Friday at $.30/gal ($.126/lb), down a half-cent. Propane jumped again, ending at the week’s high of $.715/gal, ($.203/lb).
Spot monomer began the week pressured, but traders then seemed to lose transactional interest. There was very little Ethylene excitement from either buyers or sellers, and prices did not deviate from the recent $.155/lb level. PGP dropped a large $.02/lb to begin the week, but the $.325/lb level did not seem to spark buyer interest and there the price stayed. Word began to circulate that Feb PGP contracts might settle at $.39/lb, down just a penny. We would consider that a very modest decline given the recent $.34/lb level for prompt PGP and $.325/lb quoted for March. If indeed it settles at $.39/lb, we would expect a steeper decline next month.
Spot Polyethylene trading hummed along at a quick clip and deals generally matched up without a hitch; our total volumes were solid in both the domestic and international markets. Prime railcar prices managed steady, but there was aggressive discounting for offgrade. Export prices are trying to firm up, and some offers were raised a penny, but there is the looming feeling that another surge of material could be just around the bend. Still, firmer Crude Oil prices support the floor price for incremental sales, particularly export, and a lot of material is moving. It looks like February PE contracts will roll flat, but we also note that there is a growing gap between contract prices and lower spot levels – there are plenty of opportunities to transact, try sourcing through our trading desk.
Polypropylene trading was about average, completed volumes did not impress while prices remained pressured. There were limited, but readily available supplies of most PP commodity grades, and that’s great, because most buyers are still only looking for minimal volumes. Spot prices for both HoPP and CoPP resins slipped another $.01/lb based on continued weakness in upstream monomer prices. It appears that Feb (PGP and PP) contracts might only settle down a penny, which we would consider modest. However, we also recognize that the PP market is not actually sloppy and the bigger picture provides for relatively balanced to tight supply / demand dynamics, so PP supply-chain margin expansion can also easily be justified.