Supply improved and railcars came and went in groups, as buyers were eager to procure material. This week’s sales
favored railcars over truckloads and prime more so than off grade and buyers still sought more as the week came to a
close. Export demand was excellent, and bids moved higher, lending support to the domestic market. While our prime
topside of the $.03/lb average gain that spot earned over the last 6 weeks. Buyers paid up this week and absorbed the
early 2020 bump in pricing, but also showed strong resistance to more, hence no additional advancement in our
benchmarks this week. We do, however, feel there is good momentum and prices could continue to move higher as long as
there is no new market shock or major acceleration in the spread of the Coronavirus, which has already begun to
threaten the Chinese and global economy.
The major energy markets were mixed this past week. WTI Crude Oil finally showed some resilience after its 5 week
$16/bbl loss. The sharp and steep break first resulted from the de-escalation of US / Iran tensions and has more recently
been attributed to the economic damage related to the Coronavirus. The March WTI futures contract flirted with the
$50/bbl level again this week, it found support and ultimately secured a gain of $1.77/bbl to $52.32/bbl. Brent Oil was hit
harder than WTI and this week outperformed to the upside on this bounce back, March Brent added $2.85/bbl to
$57.32/bbl, bringing the spread to a clean $5/bbl. Natural Gas futures managed to dig a deeper hole and reached a new
contract low of $1.766/mmBtu. The market did stage a recovery rally the balance of the week but failed to close the gap and scored a net loss of $.021/mmBtu to $1.837/mmBtu. NGLs both rebounded from the previous week’s losses. Ethane
was up a penny to $.142/gal ($.06/lb). Propane gained a half-cent to $.387/gal ($.11/lb).
Monomer trading was again active; bids and offers were plentiful, volume was good, and prices were mixed. Ethylene saw
interest throughout the week, but only a few deals managed to visibly come to fruition. Prompt material sold at $.155/lb
early in the week and then most deals were focused on future deliveries. By Friday afternoon Ethylene had trickled lower
and spot Feb ended at $.15/lb, down a half cent. A few other forward deals were inked and the contango narrowed with
much of the curve losing a full penny. PGP saw heavy participation and volume was hefty, but all visible transactions
were completed for the future. There was seemingly no demand for prompt Propylene and likewise, spot ended the week
flat at $.29/lb. Feb PGP contracts settled at $.32/lb, down a penny. It was a quick negotiation, which more typically
completes closer to month’s end.
It was a very good week to trade Polyethylene; the flow of offers improved, albeit at higher prices, and transactions came
together at a fairly rapid rate. Our completed volumes were strong and ran well above the 2019 average, as a smattering
of fresh railcar offers were finally shown to the spot market, satisfying some pent-up demand. LDPE for film and other
more specialty LLDPE grades were still tight amid ongoing production issues, which boosted activity for spot truckloads
requiring immediate shipment; HDPE resins were amply available, and that demand was unenthusiastic. Spot
Polyethylene deals generally consolidated at the higher end of the recent price range as the marketplace worked to digest
the Jan $.04/lb increase, which was finalized in early Feb. There is another $.05/lb contract increase on the table, but a
$.09/lb jump seems unpalatable at this time. Suppliers began pushing for the additional gains, but there was plenty of
pushback from buyers, citing the need to first move the $.04/lb increase downstream, which is a stark change in light of
the longer-term downtrend. Other processors were still happy to work off their sharp December purchases choosing to
wait and see before paying up for more material.
While PP resin prices and PGP monomer costs are well related, we have seen them begin to de-couple from the absolute
lock step that had persisted for years. This change was apparent these last few months when resin prices fell more than
monomer and we are now starting to see this pricing trend reverse as producers begin to regain a sense of pricing power.
Feb PGP monomer contracts just settled this week down a cent to $.32/lb, but in contrast, the spot PP resin market
firmed further this past week. Producers have been slowly raising asking prices seemingly to help enable an official $.03-
.04/lb margin to increase slated for March. Considering that PP prices got overdone to the downside, while recent
turnarounds and supply chain issues have limited production and resin inventories, we believe the increase has some
merit and we view the market with a bullish prospective.
Shannon Industrial is a unique business with over 50yrs experience in the plastic industry. Shannon’s Beliefs have always been loyalty, growing relationships, and providing the best possible service based on those relationships. With Shannon’s 65,000 square foot warehouse, and 38 car rail siting we have over 3 million pounds of material on hand. Material’s ranging from Commodity resins to the most obscure exotics. Shannon can accommodate orders and execute delivery on a moment’s notice.
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