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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
August 19, 2022

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Commodity resin trading maintained its slower than average pace as pricing resumed its downward trek after taking a short-lived sabbatical just a week earlier. Additional industry data released this week reminded the market that long supply/weak demand fundamentals continue to weigh on the Polyethylene and Polypropylene markets, as do continued global economic concerns, which remain uncertain. This has made buyers reluctant to make large purchases, and the overall slack demand provides buyers with leverage to push for lower prices. The drop in spot levels also comes as producers remain under pressure to clear out material as storage costs rise, empty railcar availability is limited, and brand-new production capacity is set to come online over the next 3-4 months. The overhang of material remains a heavy burden on producers looking to reduce stockpiles while resellers that desire reduced on-hand inventories continue to offer spot cars back into the market.

In the meantime, price increases remain on the table, at least for PE, as a protective measure, especially as hurricane season is typically at its most dangerous in the late Q3/early Q4 timeframe. Logistics issues persist as well, with a rail embargo in California still in place and extended lead times needed at the port. Rail congestion has the potential to become even more of an issue, though, if rail worker unions and rail carriers cannot come to a new labor agreement by September 16th. Houston warehouses packaging schedules are backed up with some rail holding tracts already full. This has all placed extra demand for ready-to-go truckloads, and in case you have a need, we have all commodity-grade PE and PP resins packed and ready to go – just contact our trading desk for well-priced material.

Energy futures were mixed as Crude Oil futures came back down amid recession fears, while Nat Gas continued to rise on the back of solid power generation demand. September WTI futures began Monday and hit a high of $92.10/bbl before falling $6.37/bbl to a low of $85.73/bbl the following day. The market rebounded through Friday before ending at $90.77/bbl, losing $1.32/bbl on the week. October Brent futures followed a similar pattern and set a high of $98.04/bbl on Monday only to drop $6.52/bbl to a low of $91.52/bbl midweek. By Friday, October Brent climbed back up and settled at $96.72/bbl for a weekly loss of $1.43/bbl. September Nat Gas futures took the opposite approach, beginning under pressure and establishing the week’s low of $8.40/mmBtu on Monday. By Wednesday, the market had jumped $1.28/mmBtu to reach $9.68/mmBtu. Nat Gas eased through Friday and finished at $9.34/mmBtu for a gain of just over $.50/mmBtu (+6.5%). NGLs firmed as Ethane jumped nearly $.015/gal to $.607/gal ($.256/lb), while Propane was up fractionally at $1.089/gal ($.308/lb).

Participation in the monomer markets remained healthy, but completed volumes were relatively low. Ethylene found additional support and racked up gains while Propylene prices dipped. Ethylene activity was very quiet to start the week, but the market still posted daily gains through midweek. Late on Wednesday, participants finally came together to ink a couple of deals for September Ethylene at $.275/lb. Deliveries for 4Q were also agreed upon a tad higher at $.27625/lb. On Thursday, the market pared back some of the earlier gains, and September Ethylene was done just a hair lower at $.27375/lb. A few more market pokes for material in Louisiana were seen Friday morning, but traders’ price ideas were too far apart to finalize further transactions. Spot Aug Ethylene rose nearly 5% on the week, settling Friday afternoon at $.27375/lb; this was a gain of a little over $.0125/lb. The forward curve remains relatively flat but is technically in an ever-so-slight backwardation.

Polymer Grade Propylene took the lead and owned the majority of market makers' participation, but like Ethylene, completed deals were scarce. Decent bids and offers were presented through midweek, and inquiries were spread evenly for spot August, September, and back month PGP deliveries into ‘23. Though no deals were consummated, sellers outweighed buyers and were able to push prices slightly lower on Tuesday and Wednesday. Thursday saw a slight price recovery, but participants were mostly focused on Ethylene. Attentions reverted back to PGP on Friday, and a few dealings were finally seen with Sept PGP completed at $.435/lb, October finalized at $.4375/lb, and 1Q PGP deliveries dome at $.4475/lb. By Friday afternoon, spot Aug PGP had scrapped off just over $.016/lb on the week and settled down to just below $.455/lb. The forward curve remains nearly flat in a very slight contango and all contract months sit below $.46/lb. As we near the end of the month, present spot levels point to an August contract increase of around $.02/lb, which would be the first contract increase seen since March.

Polyethylene trading activity was a bit uninspired as buyers continued to hold off larger volume orders in anticipation of better bargains ahead. The 2-cent drop in spot PE commodity grade prices also came with a decline in our completed orders, although a good number of inquiries still came in. There was a steady flow of offgrade railcars offers into the domestic market, while plenty of prime PE was available for certified export at deeply discounted prices. Some processors were out seeking prime truckloads for immediate shipment at offgrade railcar pricing, but suppliers seemed more disciplined not cave to these competitive but inequivalent offers. This week, the big mover in our marketplace was HDPE which was spread between Blow Molding and Injection grades. LDPE and LLDPE for both Film and Injection also changed hands during the week, but volumes were more limited compared with previous weeks. Overall availability is deemed very good, but there is still some tightness for Hexene LL and MDPE due to an ongoing FM.

Polypropylene activity and completed volumes were slightly below average; however, it was a decent week considering market conditions and earlier month results. Collective upstream PP inventories quickly swelled to heavy levels, and sales, while not terrible, have been below average, awaiting a catalyst to spur downstream inventory additions. The 2-cent drop in PP prices came alongside weaker spot PGP costs while resin supply conditions improved. Just a couple hand full of deals were completed, and our volumes were better in the latter part of the week. The best demand was seen for low flow CoPP and mid-melts HoPP. Though availability continues to improve, general supplier availability of Prime truckloads was still limited, though well-supplied through our trading desk’s market-making inventories, which carries a premium. Spot PP prices are down roughly a nickel so far this month. Spot prices fell $.07/lb in July, $.05/lb in June, and $.04/lb in May. Spot prices are down roughly $.21/lb cents since late April/early May, as spot PGP is down roughly the same amount. Given current market conditions and PP contracts not having experienced much margin erosion yet, we would expect to see some further deterioration in the coming months, barring a major supply disruption.

Total Offers 15,618,166 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
PP Homo2,465,782$.730$.850$.720$.820
HDPE - Blow Mold2,288,048$.610$.740$.650$.700
LLDPE - Film2,145,220$.600$.750$.680$.730
HDPE - Inj2,062,140$.600$.730$.650$.700
PP Copo1,856,892$.750$.940$.820$.920
LDPE - Film1,852,312$.690$.790$.720$.770
LLDPE - Inj1,288,116$.650$.760$.700$.750
HMWPE - Film897,012$.600$.690$.600$.650
LDPE - Inj762,644$.700$.790$.740$.790
 
 
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