Shannon Industrial March 18 Market Report

by | Mar 18, 2020

First and foremost, we express our sympathies and best wishes for those directly afflicted or affected by the Coronavirus. We hope it will be contained and eradicated quickly to stop the suffering, quell the fears and limit the heavy toll on society.

The spot resin markets were slow most of the week as many participants bunkered down in isolation, watching the commodity and stock markets erode in epic panic fashion. There is no doubt that the severe restriction of non-essential travel, in an attempt to contain the spread of the Coronavirus, as well as the effective shutdown of the publicly attended entertainment industry – concerts, sporting events, conferences, tradeshows, political rallies, restaurants, etc will have a large impact on the economy and ultimately plastics demand.

As if the shock from the Coronavirus was not enough, the US markets awoke Monday morning to news that Saudi Arabia and Russia kicked off an oil market war which sent Crude Oil prices plummeting as much as 30% to $28/bbl, and drove the stock market into a tailspin with wild daily swings of more than 10% seen during the week. The initial thought was OMG, resin prices could get crushed, better get out of the way and indeed we had very few buyer inquiries early in the week.

Notwithstanding the terrible situation for those directly involved with the virus, and we hope it will all clear up quickly, of course many businesses will still continue to operate. There are products that need to be made, and for that, plenty of resin pellets will still be processed. That said, by Wednesday our phones began to ring with orders and while we all recognized the negative change to sentiment, nobody was truly expecting that North American resin prices would quickly vacuum a dime lower. We did not see any panic selling and there were no cargo ships full of resin offered to just anyone who would venture a paltry bid. In fact, the highly resilient North American resin market continued on tightly supplied, but with a very cautious tone.

The international oil market got pummeled, the 1-2 punch of the Coronavirus and Oil War sent prices tumbling to the lowest level in 4 years. April WTI Crude Oil dropped an astonishing $9.55/bbl to end the week at $31.73/bbl. Brent Oil took a bigger hit, the May futures contract fell $11.42/bbl, a full 25%, to end the week at $33.85/bbl. Amazingly, Natural Gas which has been in a relentless bear market, scored nearly a 10% gain rising $.161/mmBtu to $1.869/mmBtu. Ethane fell fractionally to $.1375/gal ($.074/lb). Propane lost about a nickel to $.3175/gal ($.09/lb).

The monomer markets were very active last week, volume was heavy, and prices dropped. Ethylene was pressured from the get-go and buyers immediately scattered Monday morning. Bids returned midweek and on Friday spot March Ethylene changed hands at $.125/lb, and then multiple times at $.1225/lb, settling where it had last traded, down $.0125/lb. Propylene was extremely busy, sellers came with orders in hand, many transactions completed on Monday and pushed prices below the $.27/lb mark. The active turnover continued throughout the week, but mostly for forward delivery. By Friday March PGP had sunk nearly $.04/lb to $.25/lb and April PGP was a penny cheaper. Plenty of time remains before March PGP contracts conclude, but current spot pricing calls for a decrease in the vicinity of $.04/lb.

Spot Polyethylene trading began the week very slowly as fears from Coronavirus permeated the marketplace; however, the week finished in stark contrast, with large volumes changing hands. Some buyers sought to add to on-hand inventories as a buffer against the unknown, though a conservative tone was maintained. LDPE and LLDPE for both Film and Injection were our most active PE grades last week and prices managed steady. HDPE was weaker, Blow Mold and Injection grades each lost a penny. There is currently a $.04/lb increase on the table for March PE contracts, but given all of the unrest in the world, prompt implementation seems unlikely. International resin buyers have taken this as an opportunity to present very aggressive / lowball bids, many of which are not able to be filled at this time.

Spot Polypropylene trading was challenged this past week, fear and uncertainty hung over the market and prices slid a cent. Our order flow was evenly split between resellers and processors and completed transactions were a tad above average. There was strong demand for immediate truckloads, while just a handful of railcars changed hands. Overall availability continued tight; HoPP truckloads were available but not easy, competitively priced CoPP truckloads were outright difficult to source, and offgrade railcars were more available than Prime. The Coronavirus/Oil market declines claimed their first spot Polypropylene penny decrease of this cycle. It’s hard to say when markets will stabilize from this uncertainty, but in the meantime our trading desk is available to fill any short term needs as we all proceed with care and caution.

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.