Last week’s spot resin markets were not immune to the economic uncertainty wrought by the COVID-19 pandemic. While there was a good flow of both buy and sell inquiries, processors were generally apprehensive to pull the trigger, and, ultimately, the completed volumes were less than average, reports the PlasticsExchange in its Market Update.
The spot resin markets were challenged this past week, while there was a good flow of both buy and sell inquiries, processors were generally apprehensive to pull the trigger, and ultimately, our completed volumes were less than average. Polyethylene and Polypropylene prices were steady to mostly $.01/lb lower again, and although buyers have been pleased to see resin prices continue to ease, there have been expectations for a sharper and quicker break. Although sectors of the plastics industry have been declared essential and resin production and processing facilities can remain open, we have begun to see some resin buyers temporarily shut down, including those that feed the automotive industry, which anticipates weaker demand in light of the severe economic downturn resulting from the Covid-19 Pandemic. On a brighter note, given strong demand for groceries and food take out / delivery, governments have loosened restrictions on single use plastics, which are deemed to be safer for consumers. The export markets have been facing headwinds, both the strengthening US dollar and weaker crude oil costs each make international resin producers increasingly competitive vs US producers and together could crimp exports and weigh on Houston prices.
After several weeks of extreme volatility and massive price erosion, the major energy markets remained pressured, but moved around in a tighter range. After reaching above $65/bbl in early January, WTI Crude Oil sold down to the $20 handle this week, the lowest price since 2002 and inflation adjusted, a level that actually rivals 1973 prices. The May WTI futures contract did bounce back a bit to end the week at $21.51/bbl, still a net loss of $1.12/bbl. Brent Oil rolled to June and saw similar action, dropping $1.05/bbl to settle Friday at $27.95/bbl. Nat Gas started the week sharply lower, touching below $1.60/mmBtu, also a fresh decade low, before staging a good recovery rally throughout the week. The May contract ultimately retraced to the middle of the week’s range and finished at $1.671/mmBtu, just short of unchanged. Ethane and Propane both saw recovery gains; April Ethane added $.005/gal to $.095/gal ($.04/lb). April Propane gained $.026/gal to $.242/gal ($.069/lb).
The trading pace relaxed in the monomer markets, prices slid and volume was below average. Ethylene began the week quietly and without many bids / offers, prices just drifted lower. There was virtually zero interest in Ethylene for March delivery and traders instead turned their attention to April / forward deliveries. Transactions finally materialized midweek and additional deals were seen late in the week, although nothing was registered for prompt delivery. On Friday, April Ethylene settled down a half cent to around $.095/lb, the lowest since we began tracking prices about 15 years ago. Propylene was more active, but like Ethylene, deals took place mostly in the forward market, rather than prompt. April PGP dipped below $.20/lb to settle at $.1975/lb, nearly $.035/lb below March, which as a weighted average, includes higher prices from early in the month. The forward curve’s contango shape widened again and at week’s end, the peak Dec 2021 month rested firmly above $.29/lb. Contract negotiations have concluded and March PGP contracts settled at $.28/lb, a $.04/lb decrease from Feb. If April PGP pricing continues at current levels an even larger contract decrease can be anticipated for next month.
The spot Polyethylene market was actually pretty active despite all of the unknowns in the world today. Though transactions were generally difficult and negotiations fierce, our trading desk managed to complete a decent number of transactions which approached our trailing 12-month weekly average. The impression might be that the country is completely shut down, but this simply is not true as we’ve only seen a few instances of temporary plant closures in select regions of the country as most states deem our plastics industry as essential given its importance in the medical and food industries as well as packaging for general supply chains. We commend those firms that have shifted their production to instead make emergency supplies for hospitals and health care workers, it will take a global effort to minimize the effects from this unprecedented situation. Despite our adequate volumes, demand was still off and PE prices are expected to slide over the coming months; with that said, most of our spot prices lost a penny last week except for LD Film and LLDPE Injection which still remain difficult to source. The March $.04/lb price increase effort was suspended by producers, who will instead be challenged to stave off price decrease pressures in the coming months. International resin requests continued to flow in, but price expectations have dropped significantly as global prices slide and producers in regional markets have become amazingly competitive as their costs decline due to sharply lower Crude Oil feeds.
Spot Polypropylene trading slowed as some non-essential businesses, responding to shelter in place instructions from local governments, reduced or temporarily ceased operations. The slower consumer driven demand, coupled with tumbling oil prices, caused buyers to hold off purchases until the dust one day clears or for some, lower prices are simply at hand. Of our completed transactions, volume favored offgrade truckloads, CoPP was the main mover and buying was split between resellers and processors. Despite the lack of demand, supply continued to be quite tight for most Prime HoPP and CoPP grades. For the 4th straight week, Polypropylene prices fell $.01/lb, bringing prices in line with March PGP which also just settled $.04/lb lower. Prime prices have indeed come off, but with the shorter supply, largely due to planned and unplanned turnaround/maintenance, they have held their ground better than offgrade which has seen a larger discount develop. Contract prices could take another hit ahead as the market eyes upcoming April PGP costs, which are pointing towards another steep decline.