Spot resin trading was very good, though completed volumes were a tad light; however, considering President’s Day on Monday, we were still right on target for a 4 day week. The flow of offers was sporadic, with some grades scarce, and supplier asking prices for most commodity resins continued to edge higher. Our Prime Polypropylene prices added a half-cent this week and Polyethylene levels were either steady or mildly mixed by grade. With the Jan $.04/lb PE increase intact, most contracts are heading towards a flat Feb, though very tight LDPE resins could confirm up another $.02/lb, supported by both strong spot pricing and a major producer nomination. Some Feb PP contracts could follow PGP contracts down a cent, while others hold flat given tightly supplied conditions leading into the concerted effort to expand margins by $.03-.04/lb come March. The export markets remained hot, though higher asking prices and limited supplies challenged some sizable opportunities this week.
The major energy markets were higher across the board this week. WTI Crude Oil extended its gains from the prior week and the April futures contract gained $1.06/bbl to $53.38/bbl. Brent Oil also rallied to slightly outperform WTI, gaining $1.18/bbl to $58.50/bbl. Natural Gas had an eventful week as prices began by gapping higher and continued pushing up through the psychological $2/mmBtu barrier only to find major resistance and then fail, trading back lower to $1.861/mmBtu; the March contract recovered a bit on Friday to end the week $1.905/mmBtu, up a net $.068/mmBtu. NGL prices were positive for the 2nd week in a row; Ethane garnered a fractional gain to $.1475/gal ($.062/lb). Propane added a nice $.044/gal to $.431/gal ($.122/lb).
Monomer market activity was healthy during the holiday shortened week, volume was modest and prices were mixed. Ethylene began by drifting lower on Tuesday, spot material first exchanged hands in Louisiana at $.1475/lb and then again at $.145/lb, down a half cent from the prior week’s settlement. Traders continued to show solid interest through steady bids and offers, but visible prompt transactions were elusive. Late in the week numerous deals for future delivery came together helping to widen the forward curve contango by a full penny. Feb Ethylene settled where it last traded, down a half cent at $.145/lb. Propylene completions took a back seat, traders were inquisitive, but most opportunities were disabled by price. PGP transacted on Thursday when spot Feb reached back above the $.30/lb mark, finding a home at $.3025/lb and the forward curve contango widened slightly. As a reminder, PGP settled last week down a penny to $.32/lb.
Spot Polyethylene trading was once again very busy as availability improved for some, but not all grades. Our completed volumes were on the high side as market participants continue to tap our spot sourcing platform to fill orders for immediate shipment. Some buyers had been holding off trying to avoid higher prices but came back to buy, and indeed paid up, as their on-hand inventories dwindled. PE prices were mixed this last week and ranged from down a half cent for HD film, which continued to see demand destruction due to single use bag bans, to up a full penny for LD film, which remained scarce. Although some fresh LD Clarity railcars did emerge, albeit at new higher prices, we found that there were certainly limitations as to what processors would pay for material. At least one producer issued a letter to increase LDPE by an additional $.02/lb in February and all grades $.04/lb in March. Most PE contracts should roll flat in Feb, and a major consultancy issued its own estimate as steady, but as we have seen, that can easily be revised. Upward pricing momentum persists, but some caution that the spread of Coronavirus could bring a significant economic headwind and damage demand.
Polypropylene trading ran slightly above average and might have been even stronger, but domestic transactions were limited by tight availability, while export orders were stymied by higher asking prices. Although offers were generally limited, largely due to planned maintenance and unexpected production issues, we were able to locate good pockets of material to fill back-to-back deals and complete other transactions from our market making inventory. There was an even mix between HoPP and CoPP transactions, while our offgrade sales eclipsed Prime. Even though PGP monomer costs slid a cent in Feb, the spot PP resin market continued to firm up and added another half-cent this past week. Resellers were good buyers, some securing material for immediate shipment to their processor customers, but others were simply padding their own inventories as PP prices still appear to be heading higher. With coronavirus fears shaking markets, we will see how demand plays out and if supply remains tight enough to validate the 3-4 cent margin increase slated for March.
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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