Falling energy and feedstock costs are forcing lower plastics prices

12/05/2014

The spot resin market was surprisingly busy this past holiday shortened week (Nov. 24-28) and by Wednesday, a tremendous volume of material had already changed hands, according to a report from The Plastics Exchange. The flow of producer railcars was strong ahead of month-end and resellers were also aggressive, seeking to liquidate their uncommitted warehoused material. Prices for both polyethylene and polypropylene were decisively lower, even before the world energy markets got rocked on Friday. Resin processors received pricing relief in November; PP contracts shed $.05/lb, while PE contracts dropped $.03/lb. There is a strong likelihood to see further declines in December.

The major energy markets were crushed in active and volatile trading. Crude Oil Futures had already lost nearly $3/bbl by midweek and then really fell apart after OPEC, notwithstanding over-supplied conditions, agreed to maintain oil output levels. By the end of the week, the January Crude contract lost an astounding $10.36/bbl, 13.5%, to settle at $66.15/bbl - the lowest in 5 years. January Brent Oil futures also fell more than $10/bbl to just above $70/bbl. Natural Gas futures continued its see-saw action, this time ending the week sharply lower, sliding $.329mmBtu, 7.5% to end the week at $4.075/mmBtu. The Crude Oil:Natural Gas ratio contracted to just 16.2:1. Spot ethane reversed the prior week's $.02/gal loss returning to $.2225/gal ($.094/lb). Spot propane prices made new lows, ending the week just above $.68/gal ($.192/lb).
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