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Highlights
US helicopter down, US strikes Iran
Markets shrug off the news once again
Record exports for US economy in April
Freight rates from China increasing
Resin Markets
Well here we go, the tension has been building and it feels like the pot is about to boil over in the War in Iran. A US helicopter was downed and President Trump threatened a response and sure enough, the US retaliated. It does seem like one of these “proportionate” retaliation situations, not all out war but things certainly feel like they’re at a tipping point. Like we spoke about yesterday however, the crude and resin markets shrugged it off once again. Crude settled down $3.10/bbl to $88.20/bbl for the first close sub $90 since May 29th.
It's my opinion that if this breaks out into all out war again, and that is sustained, we will see some prices spiking back. That may seem semi obvious but the sentiment is very negative at the moment. I believe that the buffers that were in place ahead of this conflict worked to some extent not letting the markets get too out of whack but if this gets aggressive again those will have been depleted without an opportunity to refill. To be clear though, that is not currently the situation and the resin markets continued to be subdued today.
As prices have worked their way lower, US Polyethylene has become more competitive on a global scale. China had emerged as the low cost solution in April and May but shipping rates from China have increased while US resin has decreased closing the gap considerably. This is bringing interest from international markets but not enough to swing the market back higher and domestic buyers are taking advantage of the weakness and buying the market lower, getting their revenge if you will.
For Polypropylene it's a similar tale for domestic buyers who are less of a price taker than 30 days ago. The PP export market is not irrelevant but it certainly does not carry the weight of the PE export market and with weaker PGP it’s a rather simple thought process to work the market lower for now. PGP is off $.2225/lb from it’s peak on April 7th which coincides with the ceasefire announcement, while HOPP is down $.16/lb during that same time period, still a little ways to go before margins normalize.
Monomer Market
Both front months traded in the monomer market today, June Ethylene transacted at $.2425/lb earlier in the session before trading lower to $.2375/lb later in the session, still a gain on the day though. A first half of 2027 strip was also completed at $.245/lb. I also want to report a late trade which happened yesterday at $.225/lb for July. June PGP softened slightly with a dated transaction at $.405/lb and an EOM trade at $.4025/lb.
US Economic Data
The U.S. trade deficit narrowed to $55.9 billion in April, slightly better than expectations of $56.1 billion as exports climbed to a record $327.1 billion, a record. Imports were also significant, the 4th highest ever at $383 billion. Strength in capital goods, energy products, and consumer goods helped drive export growth, while imports also remained healthy, led by computers, semiconductors, and telecommunications equipment.
The NFIB Small Business Optimism Index slipped to 95.3 in May, below expectations of 96.0 and its lowest level since October 2024, as energy costs, taxes, and inflation weighed on confidence. Capital spending plans fell to their lowest level since 2009, but pricing pressure remains elevated with more owners raising prices and planning additional increases ahead.
Existing Home Sales beat expectations in May with a print of 4.2 million above estimates of 4 million and April’s 4 million.
U.S. wholesale inventories increased 0.6% in April, slightly above expectations for a 0.5% gain and following a revised 1.5% increase in March. Inventory levels are now 3.6% higher than a year ago.
Logistics
Global container flows continue to prove more resilient than many expected, with cargo finding alternative routes despite ongoing disruptions tied to the Iran conflict and the Strait of Hormuz. Freight rates are moving higher though as carriers manage capacity and add surcharges, but the flow of goods has largely continued. As I mentioned earlier in the report, shipping rates from China have ballooned and we were quoted $5350 for a 40’ft container from China to Long Beach, which is the cheapest lane typically to the US. This is up from the $1900 we were quoted in Mid March, a 182% increase.
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