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After a couple days of frigid weather, Winter Storm Enzo has cleared the gulf coast so Houston area warehouses and the ports are back open for business. Export shipments returned to normal and maybe, just maybe, the temporary shuttering of some resin reactors will give them a chance to catch up on railcar packaging and clear their yards out of embargo status. As of now space is still tight and it is still difficult to find open spots to ship fresh railcars for packaging.
Our trading desk was busy today with LDPE Film and HOPP taking the lead. Both domestic and export customers came to our platform to secure material. International buyers have been resisting higher Jan prices, still seeking Dec levels, which are long gone, but PE buyers stepped up to the plate today and paid current market prices, which are several cents higher. Prices in Europe are also on the upswing and nice volumes were booked to the region. Crude oil has been trending higher since late Dec although more recently sliding along a 5-day losing streak. Of course, Buyers in other regions still negotiated hard but sellers confidently resisted knowing that the sentiment has shifted while their replacement costs are also firmly rising. Our Resindex FAS export prices rose $.005-$.01/lb today.
Domestic resin buyers continue to ping the spot market to fill in late shipments though few fresh railcar offers were seen for either PE and PP as producers wait to assess long term effects from Enzo. Polyethylene contract increases are in play with $.05-.07/lb on the table for Jan and another $.05/lb proposed for Feb, Formosa joined the gang with their Feb letter yesterday and Exxon’s $.05/lb + $.05/lb is the most conservative. With Ethylene costs racing higher into the mid $.30s/lb due to numerous planned Cracker turnarounds and unexpected Enzo induced outages, while upstream PE inventories have thinned as a result of back-to-back record exports in Nov and Dec, the case for an increase has been made and while perhaps not the full $.05/lb this month, we can easily see 3-cents stick with more upside in Feb. Of course, if reactors are slow to return after this storm, the full Jan nickel is certainly viable.
PP contracts are on the rise, with Enterprise PDH #1 offline due to Enzo, spot PGP prices have firmed further, last bid today at $.435/lb, so as contract negotiations heat up, the $.04/lb increase that seemed likely, is now starting to lean towards $.05/lb for Jan. Even considering a nickel increase for Jan, there would still be a few more cents on the table for Feb based on current spot Feb PGP levels. In addition, several PP producers have nominated an additional $.03/lb increase for Feb to help them rebuild margin. Our spot PP Resindex prices were up another $.005/lb today.
At the World Economic Forum today, freshly minted President Donald Trump stated that he would demand that interest rates be lowered, which would be welcomed by many, but rates aren’t simply lowered by a demand. Still, it’s a nice signal, let’s see how it plays out. The domestic US processor would welcome such a rate decrease to spur inventory purchases and capital investments but inflation risks still exist. Speaking of the new Prez, Nova Chemical up in Canada issued an interesting letter today reaffirming its commitment to support its US customers by essentially bearing the brunt of the the proposed 25% tariffs on Canadian goods, if they were to be officially implemented.
This has been an exciting week so far, let’s close it off with a big Friday.
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