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Resin Market
Spot resin trading had a mixed day today, on one hand transactions came together but nothing seemed easy and I’d characterize things as just ok with August having yet to really hit its stride. Not everyday is going to be a walk in the park but transactions have not easily come together as they did in July. From a supply side there was a large quantity of offgrade cars for both PE and PP that hit the market today and even some prime ones. Supply is pretty ample for most grades.
Preliminary ACC Data has been released for July and its got a bearish tone, let’s start with PP. Production was up considerably with producers running at 87.99% of capacity which was the highest mark since August of 2024. With that they produced 1.618 billion pounds but only sold 1.526 billion resulting in an inventory build of 91.591 million pounds. Producers had been pulling things down inventory wise having drawn 7 of the last 10 months including 3 months in a row before July. Inventories now sit at 1.869 billion pounds. Even with the added production it was not enough to soak up all of the PGP out there as oversupply has pulled the monomer market lower and in turn PP prices. Sales were on the stronger side though, the third highest month of the past 12 and above the trailing 12 month average of 1.471 billion pounds.
Jumping to PE we see a similar trend, higher production and higher sales but still an inventory build. Producers ran at 94.78% which is the highest operating rate since March of 2020, the result was production of 5.733 billion pounds which was the highest number on record. Sales were strong at 5.497 billion pounds, of which 48.87% were exports. The net was an inventory build of 235.9 million pounds totaling 7.628 billion. The sales numbers ranked above the trailing 12 month average of 5.234 billion pounds. An interesting data point was that 59.44% of LLDPE was exported and we certainly felt that with plenty of cargoes being booked to Europe all of July with the strength in the Euro. Aggressive strategy from producers of both PE and PP in July.
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Monomer Market
The monomer markets were again very active, August Ethylene was brokered at $.2375/lb and $.23/lb today in Louisiana and Texas was marked at $.24/lb. We continue to see some slippage from last week’s near term peak of $.2625/lb. September also came together at $.235/lb Texas. In terms of PGP we saw September sold several times at $.32/lb but front month August was lower at $.31625/lb. 4Q PGP was also completed at $.33375/lb.
Celanese
Celanese reported Q2 earnings and the stock fell sharply today, down over 13%, despite beating analyst estimates. EPS came in at $1.90 per share vs an expected $1.40 but significantly lower than 2Q 2024 which was $2.38 per share. Revenue was $2.53 billion on lower prices and lower volume resulting in a 4.5% drop from last year. Most importantly though their outlook is softer demand the second half of the year which is the largest reason for the drop in stock price.
US Economic Data
CPI numbers were released today for July and mostly came in at or below expectations which is a major positive indication that inflation is not out of control, for now. CPI was .2% which was the median analyst forecast and lower than June’s reading of .3%. Core CPI was .3% which was also expected, although higher than June’s reading which was .2%. The equity markets took this as a sign that the Fed will cut rates at their next meeting with no surprises coming but I don’t consider that a foregone conclusion.
Another positive from today was the NFIB Small Business Optimism Index which came in higher than expectations at 100.3 signaling better business conditions and many reported it was a good time to expand.
Storm Watch
Tropical Storm Erin continues to intensify and is projected to become Hurricane Erin by late Thursday. At the moment the projections do not show a path into the gulf and resin production seems safe, it is more likely to hit the East coast of Florida, Georgia, South Carolina. Hoping for a miss altogether, the region has seen enough storms in the past couple of years.
See you all tomorrow!
-Dominick Russo, CFA
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