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Weekly resin report: Lower prices prompt plastics processors to restock
The spot resin markets were a bit slower in this past holiday shortened week, but overall volumes have been healthy in January, and at the moment, it’s gearing up to be the best month so far of 2019! PE contracts shed $.06/lb during Q4’18 and producers’ attempt to regain it all this month have fallen short of success - or from the processor perspective, it was a welcomed contract rollover in Jan. Polypropylene contracts shed $.02/lb to start the year, but it’s the same duece that should have been relieved in Dec, as that $.08/lb decrease was deemed a tad light. Still the 3-month $.20/lb decline in PP contracts has afforded processors with substantial price relief. Exports are roaring, Houston warehouses are jammed full, and as winter storms and record cold threatens to grip the US, remember to plan resin needs accordingly as logistic delays are expected.
The major energy markets retreated slightly after a couple weeks of upward momentum. WTI Crude Oil futures rolled to March with sideways action being seen for the most of the week; ultimately it finished down $.35/bbl to $53.69/bbl. March Brent futures outperformed WTI to the downside sliding $1.06/bbl to $61.64/bbl. Nat Gas futures started the week down nearly $.45/mmBtu, even trading sub $3/mmBtu; prices recovered somewhat Thursday/Friday to close the week at $3.178/mmBtu, still down a significant $.304/mmBtu. Ethane caught a bid and surged in the aftermath of a pipeline disruption; the Feb contract gained $.045/gal to $.345/gal ($.145/lb), squeezing Cracker margins. Feb Propane rolled to the front and was nearly unchanged at $.68/gal ($.193/lb).
The monomer markets were especially active and a heavy volume of material changed hands. Ethylene began Tuesday under pressure, it was offered lower and continued to soften. Most transactions seemed to complete later in the week as some traders rolled their January positions to various forward months. The bears dominated the days and spot was down almost 8% as January lost about $.015/lb, settling right around $.175/lb. Propylene activity improved; PGP experienced large trade volume early in the week with a high number of deals coming together on Tuesday, particularly for the forward months and similar results again on Friday. Prompt prices remained relatively flat around $.375/lb, while the forward curve steepened a bit more. January PGP contracts were officially settled at $.40/lb, down $.02/lb, right in line with our expectations.
Spot Polyethylene trading was on the lighter side, but still not so bad considering that it was a 4-day week. Spot PE prices were flat across the board this past week, finding some stability, but no recovery. Overall volumes in January have been good, and markedly better than in Nov/Dec. Processor demand has improved and it seems some restocking has occurred at these lower price levels, but there is still an air of caution as availability remains ample with additional new capacity on the horizon. The $.06/lb price increase nomination has been rolled over to February, when producers will give implementation another attempt. The export market remains active and with Crude Oil back up in the $50s/bbl, international regions continue to source from the US both direct from producers and through traditional trading channels.
Polypropylene trading lacked luster this past week; while the flow of offers was heavy, market clearing prices were only steady, though we have seen some consolidation occur at the lower end of the range. As time passes and discounted railcars reach packaging warehouses and customer sidings, we are seeing fewer relatively high-priced offers from suppliers as competition requires. We are starting to see more HoPP Raffia for fiber, CoPP No Break and Random Clarified resins in the market, availability for these grades was generally scarce during much of 2H’18. As we anticipated, both PGP monomer and PP resin contracts settled down $.02/lb in January. Forward monomer contracts are currently pointing to rising prices ahead – for the next 18 months or so and beginning in Feb/Mar, so as resin is now around, it might be prudent to begin buying a little more PP than current processing needs.