Spot resin market activity picked up this week, as good spot offers, which have been accumulating, found willing buyers that have no doubt been affected by well-publicized record crude oil prices. While September Polyethylene contracts have rolled steady to August contracts, and most Polypropylene contracts will settle around $.025/lb lower along with monomer contracts, producers of both resins are again preparing to raise prices in October.
While many world economies are humming along, the US has been hurt by a weak real estate market which has made many sub-prime and variable rate loans vulnerable. To help, the US Fed lowered interest rates which have also further weakened the US dollar. The value of the US Dollar has now plummeted to record lows, less than $1.41 per Euro and for the first time in more than 30 years is now worth less than the Canadian Dollar.
The US dollar's devaluation has been driving dollar denominated crude oil prices higher. This past week, expiring October Crude oil futures reached all-time highs above $84/bbl; November, the new front month, rallied $3.52 this week to close at $81.62/bbl. Natural gas prices have also been volatile, driven largely by hurricane fears. This past week they were mostly under pressure and fell $.20/mmBtu to close at $6.09/mmBtu on Friday.
Since world Polyethylene production is primarily derived from pricey crude oil, foreign resin prices have been supported by cost push pressure. International resin traders, in search for a better price, continue to eye and buy US resin. Much of US Polyethylene is derived from Natural Gas, whose cost is relatively cheap when compared to Crude Oil. Further, when US resin prices are converted from Dollars/lb to Euros/MT, all of our resin is seen as a deal.
While The Plastics Exchange's spot export trading had slowed, the pace has again begun to increase. The arbitrage opportunity has once more become so compelling that traders have overcome logistics constraints and competitive Asian offers to export at near record pace.
With resin price increases again on the table for October, producers will look to firm the spot market. There are many fundamentals at play, and while the market is still under pressure, we could see a situation develop where resin prices can resume their charge higher - at least in the beginning of October. Considering this, during this last week of September, the addition of some short term defensive resin stocks might be advised.
While many world economies are humming along, the US has been hurt by a weak real estate market which has made many sub-prime and variable rate loans vulnerable. To help, the US Fed lowered interest rates which have also further weakened the US dollar. The value of the US Dollar has now plummeted to record lows, less than $1.41 per Euro and for the first time in more than 30 years is now worth less than the Canadian Dollar.
The US dollar's devaluation has been driving dollar denominated crude oil prices higher. This past week, expiring October Crude oil futures reached all-time highs above $84/bbl; November, the new front month, rallied $3.52 this week to close at $81.62/bbl. Natural gas prices have also been volatile, driven largely by hurricane fears. This past week they were mostly under pressure and fell $.20/mmBtu to close at $6.09/mmBtu on Friday.
Since world Polyethylene production is primarily derived from pricey crude oil, foreign resin prices have been supported by cost push pressure. International resin traders, in search for a better price, continue to eye and buy US resin. Much of US Polyethylene is derived from Natural Gas, whose cost is relatively cheap when compared to Crude Oil. Further, when US resin prices are converted from Dollars/lb to Euros/MT, all of our resin is seen as a deal.
While The Plastics Exchange's spot export trading had slowed, the pace has again begun to increase. The arbitrage opportunity has once more become so compelling that traders have overcome logistics constraints and competitive Asian offers to export at near record pace.
With resin price increases again on the table for October, producers will look to firm the spot market. There are many fundamentals at play, and while the market is still under pressure, we could see a situation develop where resin prices can resume their charge higher - at least in the beginning of October. Considering this, during this last week of September, the addition of some short term defensive resin stocks might be advised.
