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Weekly resin report: Processors anticipate another decrease in PP prices
Spot resin trading was very good this past week, which brought month-end; volumes eased back from the frantic pace seen during most of Feb, but the total tally was still above average. Buyers continued to scoop up favorable Polyethylene offers, while Polypropylene processors only picked away as needed. Commodity PE resins gained a half-cent across the board, as the low end of pricing seemed to be cleaning up and asking prices began March about a penny higher. Spot PP pricing continued to slide, the Feb decrease was deemed too light, thus maintaining the negative bias into March. Exports for both PE and now PP have been impressive and Houston warehouses remain nearly full with packaging delays still seen.
The major energy markets were mixed amid heightened volatility - prices averaged a 5% range over the course of the week. WTI Crude Oil was in positive territory until late Friday, but then bled into the red, wiping away current gains and even returned the previous week’s advancement. The April futures contract ultimately settled Friday at $55.80/bbl, down a net $1.46/bbl. Brent Oil fell even more, the front month May futures contract lost $2.18/bbl to $65.07/bbl. Nat Gas futures went the other way and continued to recover, picking up another $.12/mmBtu to finish the week at $2.859/mmBtu. Ethane attempted to rally early, but couldn’t hold on; it ended the week at $.2875/gal ($.12/lb), down more than a cent. After 2 weeks of solid gains, Propane prices busted back, chunking off a hefty $.045/gal to $.67/gal ($.19/lb).
The monomer markets saw limited interest this past week and prices mostly held near steady. Ethylene activity was subdued with just a few visible transactions peppered in during the week. On Friday, prompt officially rolled to March and settled up a quarter-cent to $.1575/lb, which is still within the realm of multi-year lows. Propylene shaved a half-cent early in the week, making a new low for the move, but then picked it right back up, ending the week at $.325/lb, which was still at least $.015/lb below the last Feb PGP spot print. The February PGP contract officially settled at $.385/lb, down a mere $.015/lb. We see this as overly modest, and given the large discount that prompt already holds to contract, already sets up PGP for a moderate decrease in March - every bit of $.03/lb, if the traditional spot to contract relationship holds.
The spot Polyethylene market eased off its hectic pace, but completed volumes were still quite healthy. Sourcing was slightly tougher towards the end of the week, which saw the calendar change to March, as suppliers at minimum held firm on their pricing and in many cases, ratcheted their levels up a penny or so. It was enough to support a half-cent rise across the board of all spot PE commodity grades. Over the course of this bear run, we have seen several attempts to bottom out the PE market and bolster prices, so time will tell if this little bit of traction will take hold in March. Feb contracts rolled flat, there is another attempt to implement a price increase in March, which now seems to average around $.03/lb, but realistically can it stick?
Spot Polyethylene prices fell heavily over the past six months / year, while contracts simply have not. There continues to be large discounts provided for fresh spot railcars and we believe that the gaping gap will eventually need to shrink. A quick correction is not clearly imminent as spot prices have failed to rally and even begin to close the discount, while wrestling additional decreases out of producers has proven difficult. In the meantime, we have seen processors often opt for their minimal contract commitments blended with spot purchases, and no complaints here as our transacted volumes are growing. So feel free to reach out to our trading desk to tap the spot market and make some sharp buys – ample supplies of resin await.
Polypropylene trading was again only average at best; we are still seeing a normal flow of offgrade resin, along with occasional well-priced prime railcars. However, spot demand remained soft as processors anticipate another decrease for March as the $.015/lb decline in Feb contracts leaves something more to be desired. For the third week in a row, prices for both HoPP and CoPP slid another penny as prices slowly erode, playing catch up (or down) with lower PGP levels. Still, Polypropylene prices have come off dramatically the past several months and processors are enjoying the savings, but with market sentiment still negative, we have yet to see a major restocking effort ensue. Domestic demand in January was actually down about 2% compared to the 4th quarter. Even though exports more than doubled to about 3% of total PP sales, 42 million lbs is just not enough to soak up surplus supplies, which have grown for three months solid. Upstream resin inventories have reached their highest level since Dec 2017.