Volume: Strong
Price: Stabilizing
The Polyethylene market was busy this past week. Early on, we saw several large groups of Generic prime offerings that overshadowed the normal flow of good widespec railcars. With the Polyethylene price increase held off for two consecutive months, overall market sentiment has been bearish and sellers have chased purchase orders. While technically the market still looks weak, it is hard to view record upon record oil prices and not think that the resin markets will soon be affected. Indeed, as the week wore on, buyers, particularly those that have been drawing down inventories, became more aggressive and began purchasing some of these offers.
While the Polyethylene business has been very good, producers are now getting pressured by rising Ethylene costs. A series of gulf storms along with several planned outages have hurt production and are limiting Ethylene supplies. In the past couple of weeks spot monomer prices have increased about $.05/lb, to trade above $.50/lb on Friday. If the strength continues, it is likely that Ethylene contracts will move higher in October.
While the Ethylene market is now strong, some people expect the current supply shortage to resolve and for monomer prices to be lower in 2008. We are only about to enter the 4th quarter, and plenty can change even before we even begin the new year; however, the forward curve is currently in backwardation, which calls for prices to ease as time moves on.
Citing rising costs, comfortable inventories and strong overall demand, producers have reiterated their intention to raise Polyethylene prices in October. For the third time, they will again seek to implement a $.04/lb increase. Previous price increases through July were facilitated by strong exports that helped keep producers' inventories low; however, momentum was lost during August when European traders and businesses took a holiday. Around this time, we began seeing an increase in exports to the South.
From a US perspective, while European demand has astonished, Asian export demand did not really develop this summer to the extent that some observers had anticipated. While overall exports have been very strong, North American producers had to lower prices in August to remain competitive with Asian offers. Instead of adding to demand as in past summers, Asian traders have also been on the sell-side to Europe and South America.
We are now entering a seasonal period of heightened domestic demand. Prior to the US dollar taking another turn lower, it was questionable whether the domestic market itself would be able to sustain this price level. With the arb re-opening, the challenge might not need to be met. Since resin producers are expected to make a strong push to implement their $.04/lb price increase in October, a little buy-ahead protection is advised during this coming week.
Price: Stabilizing
The Polyethylene market was busy this past week. Early on, we saw several large groups of Generic prime offerings that overshadowed the normal flow of good widespec railcars. With the Polyethylene price increase held off for two consecutive months, overall market sentiment has been bearish and sellers have chased purchase orders. While technically the market still looks weak, it is hard to view record upon record oil prices and not think that the resin markets will soon be affected. Indeed, as the week wore on, buyers, particularly those that have been drawing down inventories, became more aggressive and began purchasing some of these offers.
While the Polyethylene business has been very good, producers are now getting pressured by rising Ethylene costs. A series of gulf storms along with several planned outages have hurt production and are limiting Ethylene supplies. In the past couple of weeks spot monomer prices have increased about $.05/lb, to trade above $.50/lb on Friday. If the strength continues, it is likely that Ethylene contracts will move higher in October.
While the Ethylene market is now strong, some people expect the current supply shortage to resolve and for monomer prices to be lower in 2008. We are only about to enter the 4th quarter, and plenty can change even before we even begin the new year; however, the forward curve is currently in backwardation, which calls for prices to ease as time moves on.
Citing rising costs, comfortable inventories and strong overall demand, producers have reiterated their intention to raise Polyethylene prices in October. For the third time, they will again seek to implement a $.04/lb increase. Previous price increases through July were facilitated by strong exports that helped keep producers' inventories low; however, momentum was lost during August when European traders and businesses took a holiday. Around this time, we began seeing an increase in exports to the South.
From a US perspective, while European demand has astonished, Asian export demand did not really develop this summer to the extent that some observers had anticipated. While overall exports have been very strong, North American producers had to lower prices in August to remain competitive with Asian offers. Instead of adding to demand as in past summers, Asian traders have also been on the sell-side to Europe and South America.
We are now entering a seasonal period of heightened domestic demand. Prior to the US dollar taking another turn lower, it was questionable whether the domestic market itself would be able to sustain this price level. With the arb re-opening, the challenge might not need to be met. Since resin producers are expected to make a strong push to implement their $.04/lb price increase in October, a little buy-ahead protection is advised during this coming week.
