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  Past Reports
Weekly Market Update
ThePlasticsExchange.com
Market Update
July 12, 2024

Summary

The spot resin market began the week with a flurry of transactions that ran right through Wednesday, business then slowed a tad, but we saw another little surge before the weekend. Our completed volumes were healthy though they pulled back a little from the previous week’s pace as the industry faced new supply challenges. Our prime Polyethylene and Polypropylene prices popped up a penny or more early on and mostly held that level through the week. Aside from a trickle of offgrade railcars shown to the spot market, prime railcars were restricted as producers generally pulled offers as they evaluated conditions in the wake of Hurricane Beryl. The storm had taken a surprise turn north and made landfall right through the Houston area on Monday, thrashing the region with winds that approached 100 mph while dumping a foot of rain, which caused widespread flooding, complicating recovery efforts and will leave lingering logistics headaches and delays. The storm knocked out power to some 2.7 million residents and by the end of the week, close to a million people were still without power.

Several PE / PP producers in the storm’s path including Ineos, Formosa, Lyondell Basell, Baystar and Dow performed precautionary shutdowns and / or executed their adverse weather preparation plans ahead of the storm. After preliminary damage assessments, it seems that there were few major problems and most facilities have begun to restart operations; however, the Enterprise PDH #1 Unit has reportedly had meaningful issues. Despite the reduced quantity of Ethylene and PGP monomers needed to process this week due to resin production disruptions, the spot monomer markets held up well and even moved higher in price. The Port of Houston was also closed for two days and several warehouses faced power outages and were closed through Tuesday. If resin reactors can get back up to speed without further issue, the primary impact of this season’s first Gulf hurricane will be about a week or so of lost production, as well as an elevated disaster premium and awareness as the hurricane season is just getting underway.

Polyethylene trading was limited by the lack of fresh supply as producers generally withheld their material from the spot market pending post-hurricane restarts and / or the evaluation of overall market conditions. There were a few prime railcars made available from reseller forecasted commitments later in the week and these sold fairly quickly. The majority of our truckload orders were filled from The Plastics Exchange market making inventories, which we maintain to assure liquidity for our spot marketplace. The first round of July export offers sold out immediately, and we have not seen additional fresh offers, though some traders still have limited volumes to sell. Significant export demand remains though we started to see a little pushback on price again as freight rates from Asia to LatAm paused in their rise and showed some signs of softening, but still remain right up against their highs of this cycle. Producers ultimately rolled their $.03/lb price increase from June into July which already has its own $.05/lb increase on the table. It is still to be seen as the month is still young, but Beryl might prove to be the catalyst to help producers secure a price increase in July. In addition, a fresh nickel has already been issued for August, so in total there are currently $.13/lb of increases out there.

Baystar restarted two of three lines at its Bayport Polyethene reactor but was dealing with rail service delays. Dow Chemical’s three plants heard to have preemptively shut down, were likely also being assessed for damage and prepared to restart operations, although the company did not provide any details publicly. LyondellBasell’s Matagorda, Texas HDPE plant assumed to have shut down but has not released any operations details confirming their present situation. Ineos Olefins and Polymers had taken precautionary measures shutting down its PE and PP reactors ahead of the storm; during the past week, the company continued its efforts to evaluate impacts to their reactors and logistics infrastructure prior to restarting operations.

Preliminary June data released by the American Chemistry Council (ACC) showed the Polyethylene production in June was reduced by more than 250 million pounds compared to May, but were still 1% above the trailing 12-month average. Domestic PE sales were strong, nearly 3.5% above the 12-month average, while PE export sales jumped about 150 million pounds from May and represented almost 47% of total PE sales. When the dust settled, producers’ collective PE inventories had drawn by more than 1%. Drilling down deeper revealed that LDPE exports soared to more than 50% of total LDPE sales amid excellent Chinese demand, leaving the second lowest upstream LD inventories since Aug 2021. LLDPE inventories were also drawn down sharply to the lowest level since August; we have certainly felt these materials quite tight in the spot market. HDPE went the other way and inventories built for the second month in a row, we are finding injection grades to be plentiful, indicative of new reactor starts, though HDPE for blow molding and film remain relatively scarce.

The spot Polypropylene market also took pause to assess conditions after Hurricane Beryl barreled through the Gulf which temporarily shut down some production capacity. Our Prime PP prices rose a solid cent and now sit about $.07/lb higher than the cycle low made in the beginning of May. There were ultimately limited damages to plastics facilities, though a PDH unit faced an enduring outage, further compromising already tight PGP monomer supplies. Formosa Plastics issued a press release essentially stating that no severe damage occurred at its facilities due to the storm as the company worked to restore normal operations by Friday. While some sporadic widespec railcars flowed into the spot market, which sold at rising prices, all the prime HoPP and CoPP that transacted across our platform this week came from trader-owned supplies. There were some Prime railcars offered from reseller forecasts, but they were priced on a PGP monomer plus basis, and with spot PGP on a serious upswing, spot buyers felt it excessively risky to take a bite. July Polypropylene contracts are currently pointing to a nickel or more increase based on rising PGP monomer costs while producers are also seeking an extra $.03/lb increase to expand their margins.

Preliminary data recently released by the ACC for June showed that resin reactors ran harder, and above 85% of capacity for only the second time in two full years. Producers leveraged strong export demand to support the added production which also put upward pressure on the PGP monomer market. PP exports were the highest since Aug 2023 and domestic sales flourished too, running 4% above the trailing 12-month average. In the end, almost all of the added production had found a home leaving a negligible upstream inventory build of less than 10 million lbs. We encourage you to subscribe directly to the ACC for detailed production and sales data.

Monomer market activity ramped back up as participation improved and completed volumes grew while prices moved north. Post Hurricane Beryl, aside from minor refinery issues, the only major production disruption confirmed so far was Enterprise’s PDH 1 going down. Details on the problems and the extent of downtime were not disclosed.

Refreshed from the long Holiday break, Ethylene activity bounced back from the tepid trading pace seen the prior week. Inquiries began early Monday morning and though completed deals fell flat to start the week, firmer bids helped push the market slightly higher on Tuesday. The first transactions materialized Wednesday afternoon when spot July Ethylene exchanged hands three separate times at $.2525/lb. Prices pressed higher and another couple of deals for prompt delivery were finalized at $.255/lb followed by a solo transaction for July Ethylene at $.2575/lb. On Thursday, traders briefly moved delivery locations to Louisiana where they first bartered spot material at $.30/lb and then twice at $.305/lb. Same day back in Texas, brokers executed July Ethylene twice at $.26/lb. These Thursday trades highlighted a large $.045/lb geographical delivery spread between the two locations. Prices continued to advance on Friday and another couple of transactions for July were inked at $.2775/lb. The spot average for July Ethylene jumped up nearly 10% during the week, gaining $.0225/lb to rest Friday afternoon at $.2725/lb. Deferred contracts rose too, but were slightly outpaced by spot.

Propylene entered the new week with strength carried over from the previous trading session. Bids and offers began to accumulate on Tuesday and the first deal was struck that morning when deals for 2H PGP were solidified twice at $.455/lb; later that afternoon, prompt July PGP swapped hands four times at $.51/lb. On Wednesday, participants moved out on the curve and dealt Oct PGP four times at $.48/lb before traders secured four more lots of July PGP at $.515/lb. Heavy turnover resumed on Thursday and traders focused attention on completing future deliveries; Jul/Oct PGP was flipped, a deal exchanging Oct/1Q PGP was issued, and Aug-Sep/Oct 24 PGP was also done. Prices continued to run higher, and the heaviest daily volume was seen on Friday before traders packed it in for the weekend. Spot July was brokered five times at $.52/lb, Aug PGP first came together twice at $.505/lb and then once more at $.50375/lb, Sep was inked twice at $.495/lb and then later at $.49375/lb, Q1’25 PGP was done twice at $.48/lb and Q2’25 PGP was completed slightly lower at $.4625/lb. By Friday afternoon spot PGP stood at $.52/lb and the weighted average of July PGP had inched up nearly a penny to rest for the weekend at $.512/lb. Back months also rose and the forward curve remained in backwardation. Ample time remains to influence price direction before July contracts are negotiated, but at current levels a $.05-.06/lb increase is supported.

The major energy markets were mixed again as logistics and refinery demand were affected by the hurricane. The late week Crude Oil recovery rally lost steam and snapped its four-week winning streak, while Nat Gas rebounded on warmer weather conditions. Aug WTI dropped to a mid-week low of $80.81/bbl before rebounding $2.93/bbl and back into the green, to a Friday intraday high of $83.74/bbl. The market could not hold its gains and slid back to end the week at $82.21/bbl, a net loss of 95 cents. September Brent dropped $2.91/bbl from its Monday high of $86.91/bbl to a Wednesday low of $84/bbl and went into the weekend at $85.03/bbl, it was a net loss of $1.51/bbl. Aug Nat Gas futures went from a Tuesday high of $2.448/mmBtu to a Friday low of $2.249/mmBtu before finishing Friday at $2.329/mmBtu. NGLs were also mixed with July Ethane up more than a half-cent to $.1643/gal ($.07/lb) and July Propane down 3.7 cents to $.809/gal ($.23/lb).

Total Offers 18,558,196 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
PP Homo3,455,850$.575$.685$.620$.670
HDPE - Inj2,860,420$.465$.580$.515$.565
LLDPE - Film2,845,650$.495$.585$.515$.565
LDPE - Film2,645,968$.530$.610$.535$.585
HDPE - Blow Mold2,493,220$.520$.610$.530$.580
PP Copo1,843,392$.615$.740$.680$.730
LLDPE - Inj1,115,932$.545$.645$.560$.610
HMWPE - Film763,196$.510$.595$.530$.580
LDPE - Inj534,568$.590$.680$.580$.630
 
 
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