Plastic Market Update
dated on Jun. 18, 2021
Summary
| Total Offers 12,354,228 lbs | Spot | Contract |
| Resin | Total lbs | Low | High | Bid | Offer | | LDPE - Film | 2,695,864 | $.990 | $1.120 | $1.060 | $1.110 | | PP Copo | 2,652,496 | $1.280 | $1.520 | $1.410 | $1.510 | | PP Homo | 2,584,416 | $1.210 | $1.430 | $1.310 | $1.410 | | HDPE - Blow Mold | 1,762,300 | $1.050 | $1.150 | $1.070 | $1.120 | | LLDPE - Film | 1,071,840 | $.950 | $1.040 | $.950 | $1.000 | | HMWPE - Film | 573,196 | $.900 | $.970 | $.870 | $.920 | | HDPE - Inj | 573,196 | $.950 | $1.060 | $1.020 | $1.070 | | LLDPE - Inj | 264,552 | $.960 | $1.060 | $1.030 | $1.080 | | LDPE - Inj | 176,368 | $.960 | $1.040 | $.990 | $1.040 | |
Spot resin trading remained active, though our completed volumes tallied slightly below the previous week but well ahead of year-ago levels. Most spot Polyethylene and Polypropylene prices held steady for a second consecutive week, and although buyers were wishfully trying to talk the market down, there was still no real sign that US commodity resin prices were imminently headed for a reversal lower. Some market participants pointed to the return to healthy reactor rates and corresponding build in some upstream resin inventories, but domestically produced prime resin was still very difficult to source in the spot market, and Force Majeures (FM) and sales allocations remain in place for many producers. There was some resistance to market pricing early in the week, but buyers that truly needed material, clearly unable to find a better deal out there, came back later in the week to pay suppliers’ asking prices. Producers showed their intent on maintaining the firm undertone that has been the prevailing theme throughout this year by announcing another round of PE price increases for July. The July nominations came as June contracts have yet to be finalized but leaning heavily towards implementation.
The energy market strengthened further, which contributed some upward cost pressure on resins. Crude was mostly higher, with good driving demand and producers bracing for Claudette in the Gulf. Nymex WTI crude oil finished Friday at $71.64/bbl, gaining $.60/bbl on the day and $.73/bbl on the week. Brent crude concluded the week at $73.52/bbl, climbing $.82/bbl from the previous Friday. Natural Gas came down, however, and closed ahead of the weekend at $3.215/mmBtu, shedding $.038/mmBtu from Thursday and $.081/mmBtu on the week. Direction from the NGL market was mixed, though, seeing Ethane futures fall and Propane futures jump. The Ethane contract started the week on an uptick setting the week’s high of $.278/gal ($.117/lb) on Monday and finished Friday at $.276/gal. Propane direction took the complete opposite route, making the week’s low of $.938/gal ($.265/lb) on Monday, only to finish Friday on a high note with a settlement at $.952/gal.
The Monomer market also firmed amid good turnover and small gains were seen for both Ethylene and Propylene. June Ethylene rose by more than a cent on the week to $.28835/lb. June Polymer-Grade Propylene (PGP) transacted during the week at $.78/lb, and the month’s weighted average finished Friday with a fractional gain to $.77318/lb. The Monomer markets stayed backwardated, with July Ethylene ending Friday at $.285/lb and July PGP ending at $.695/lb and larger discounts for future months. Based on current spot levels and dealings during June, we expect PGP contracts to rise by as much as $.10/lb, but with July PGP trailing well behind, June contracts could strategically see a more benign increase take hold.
Spot Polyethylene demand remained robust and once again our completed orders were limited by scarce resin availability. Despite stronger production rates, contract orders are fed first, leaving scant supplies for spot sales. One producer indicated they were already sold out for the next two months. Completed orders were spread out with LDPE Film, LLDPE Film, and HDPE Blow Mold business accounting for 81% of our total PE business on the week. The other main commodity grades: HDPE Film, LDPE Injection, and LLDPE Injection, saw moderate flow, accounting for the 19% balance of our PE trading. All prime PE grades were transacting over $1.00/lb, except HDPE HMW Film, which has been firming back higher again. HDPE Blow Mold still held the largest premium due to its scarcity and the impractical imports of bottles, which is mostly just shipping air. PE demand from Mexico was just as strong as it was last week. Producers will likely secure their average $.05/lb increase for June PE contracts; in the meantime, at least 3 producers announced their intention to increase prices again in July. Producers nominated price increases for June within a range of $.05-$.07/lb, driven by solid demand and limited supply availability.
Dow said it will increase the price for all Polyethylene resins sold in the US by $.05/lb for July, or as contracts allow. The company added that it was implementing its previously announced price increase of $.07/lb for all HDPE resins and $.05/lb for all LLDPE and LDPE resins sold in the US, effective June 1. LyondellBasell said its Equistar Chemicals business is increasing prices for all grades of Polyethylene products sold in North America by $0.05/lb, effective July 1. This is in addition to any previously announced price increases, including a $0.07/lb price increase being implemented on June 1. Meanwhile, INEOS announced a price increase of $.03/lb for HDPE, effective July 1. The INEOS July increase was in addition to its previously announced price increase of $.05/lb, effective June 1. June PE contracts are expected to settle towards the end of the month. Buyer reaction to the nominated July increases has been thin, but there is growing market sentiment that June will see an increase.
The July price announcements also come with many producers still on FM and/or with contract allocations in place. LyondellBasell was the latest producer to declare FM, doing so on Thursday for LLDPE at its La Porte Texas facility following a Q1 reactor equipment failure. The notice comes after the company lifted its FM on all Polyethylene compounds in April, according to market participants. La Porte was already on FM for other PE products. LyondellBasell lifted FM on all products, except at its Chocolate Bayou, Matagorda, and La Porte facilities. LyondellBasell did not give a timeline for how long the force majeure would be in place but said it was evaluating the impact on production and logistics capability, and it would provide additional information once it assesses supply capabilities.
As for Polypropylene trading, completed volumes were solid and like PE, still limited by prompt availability. Homopolymer and Copolymer prices held on to their gains for another week, remaining in the vicinity of all-time highs. Copolymer still commanded its $.10/lb premium to Homopolymer, which has been intact since mid-May. Copolymer was also the most active grade traded at The Plastics Exchange this past week; with limited domestic supply, most material was sourced from Asia and to a lesser extent the Middle East. PP contracts will confirm higher again in June, with producers pushing for an $.08/lb margin increase in addition to a rise in the June PGP contract. Perhaps we will see a total of $.10-$.12/lb implemented and with June PGP monomer trading at a premium to July. We might expect producers to push for the lion’s share of the increase to be slanted towards margin, which is more sustainable than the cost-push PGP induced increase, some of which could potentially erode next month unless July monomer strengthens.
Sourced from: https://www.theplasticsexchange.com/Research/WeeklyReview.aspx
