The resin markets were challenged this past week, pushed and pulled by opposite supply / demand forces which set a very nervous tone. Market participants took a big step back as another wave of the Coronavirus news shocked the stock market with fears it might trigger an economic slowdown and sent many commodity markets, upstream energies included, into a downward tailspin. But what about commodity grade resins? Interestingly enough, North American plastics prices have held up amazingly well and saw mixed results this week. Polypropylene prices actually achieved gains, as supplies generally remained quite tight and recent upward market momentum could still lead to the implementation of the $.03 – .04/lb margin increase slated for March. PE levels were steady to mostly lower, though some materials such as LDPE Clarity and LLDPE injection remained outright scarce. There is another $.04/lb Polyethylene increase on the table for March. Despite manufacturing shutdowns in China, a key export destination, we have not (yet) seen a slug of material re-offered into the spot market.
The major energy markets suffered one of the worst single weeks declines in recent memory. Both WTI and Brent Oil absolutely collapsed, both seeing double digit percentage declines as fears of the Coronavirus and its effects on oil demand took center stage. April WTI lost $8.62/bbl to $44.76/bbl, these new 52-week lows were more than $20/bbl below the recent peak price seen in early Jan 2020. May rolled to the new front month for Brent Crude and lost $8.27/bbl to $49.67/bbl. Natural Gas prices continued to erode, resuming the almost relentless downtrend that began in late 2018 when it peaked near $5/mmBtu; the April contract plummeted another $.233/mmBtu to $1.684/mmBtu, new contract lows. Ethane lost less than a cent to $.144/gal ($.06/lb). Propane gave back most of the previous week’s gains, by shedding a sizable $.033/gal to $.397/gal ($.113/lb
Month-end monomer markets remained active; volume was heavy and prices moved lower. Ethylene continued its downtrend as prices slid throughout the week. Spot Feb saw good interest and several completed transactions as participants seemed to roll upcoming deliveries from prompt to later in the year. On Friday, spot material in Louisiana changed hands at $.125/lb, a penny discount to material offered in Texas. By Friday, spot Feb Ethylene had peeled off a full cent to settle at $.135/lb while March Ethylene was priced at $.13/lb, a level not seen for 6 months. PGP did not escape the negative market sentiments and prices dropped daily. Participants were more interested in dealing for future deliveries rather than prompt; and heavy volumes transacted for Q4 of 2020. On Friday, Feb PGP settled just above $.29/lb, while March was pegged at $.28/lb, which currently indicates some modest downside for upcoming March contracts.
Polyethylene trading was good, but not great; the mood was dreary as many market participants watched equity and commodity markets meltdown in amazement amid fears that the Coronavirus could cause a global slowdown. This seemingly sent processors to the sidelines to reevaluate their upcoming purchases and inventory levels. Despite distractions, deal after deal came together to make for a very solid February. Although we expected that resin availability would loosen up as typical during the last week of a month, supply was still rather tight for most grades. Still, shaky sentiment got the best of the PE market, clipping the wings of the fledgling bull cycle that was starting to fly. Our spot PE prices averaged down a cent this past week; LD Clarity was the strongest and held steady, while LLDPE Film was the weakest down a large $.02/lb, and all other grades were somewhere in between. The February contract market appears to be flat for all grades except for LDPE which seem to be adding $.02/lb on the back of tight supplies and supported by strong spot pricing. Another $.04/lb increase is on the table for all PE grades in March, but given recent developments, producers might be happy just to hang on to the $.04/lb hike achieved in Jan.
Polypropylene trading was about average, and deals were more difficult to complete than in recent weeks. Transactable railcars and truckloads of CoPP were very difficult to come by; HoPP availability was slightly better, but not by much. Supply remained very tight due to reduced production related to both planned maintenance and unexpected outages, though this was somewhat offset by slower demand largely attributed to general uncertainty related to Coronavirus fears. Resellers were more active buyers than processors and offgrade was more sought for savings over soaring asking prices for Prime. We continued to see divergence between PGP and PP prices, as scarce Polypropylene availability is sending prices higher despite rapidly eroding energy prices and falling monomer costs. This dynamic makes sense as limited resin production has been unable to consume the growing glut of monomer, weighing on this feedstock cost. PP producers are seeking a price increase of $.03-.04/lb above the change in March PGP contracts; implementation is now leaning towards likely given spot market momentum and historically light inventories at the producer level, but these PP margin increases have also been very hard to secure in the past.
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