Market Update
Plastics Feedstocks (Oil, Naphtha, Propane)
- Since our last report two weeks ago, oil and naphtha prices are about the same and propane prices are down about 7%.
- WTI crude oil prices are unchanged around $79/barrel. WTI Crude oil is up a little over 12% year to date from a Jan 2 starting price around $70/barrel. Last year global exporting nations cut crude oil production to stop the slide in prices that occurred in the 4th quarter of 2023. Many oil analysts expect these production cuts to be extended past the 1st quarter into the 2nd quarter as global demand has not picked up enough to suspend these cuts.
- Naphtha prices (CIF Japan) are the same at $690/mt.
- Physical propane prices in Mont Belvieu, TX pulled back to 85 cents per gallon (cpg) from 92 cpg. Prior to this recent pullback propane prices were up 34% year to date for reasons we highlighted in our last report.
Propylene
- Physical PGP prices are 55cpp, up only 1cpp from two weeks ago. Since our last report, physical PGP prices dropped down to 52cpp on Thursday Feb 15th and then rallied up to 57cpp on Friday Feb 23rd and then traded at 55cpp yesterday. The February monthly average for physical PGP prices will come in around 52.9cpp. This is up from 48.8cpp for the January monthly average for physical PGP. PGP prices have increased 6 months in a row after it reached a low monthly price of 31cpp in August 2023.
- In our last report on Feb 14th BlueClover estimated that the February contract PGP price would increase 4cpp. This has now been confirmed and the Feb contract PGP price is 55cpp, up from 51cpp in January. We’ll take that small win.
- BlueClover’s bigger claim has been that we expect a significant price drop at some point in the next two months. Our estimates would expect the price drop to occur in March. However as we wrote in our last report, it is incredibly difficult to call the top of bull markets and March may end up pricing higher than February given the continued tightness. All that being said BlueClover is expecting a decrease of 12 to 15cpp in contract PGP prices either over a two month period (either the March-April time period or the April-May time period).
- BlueClover is estimating March contract PGP in the 44-47cpp (up from 43 – 46cpp in our last report) range and April in the 40-43cpp range (same as our last report)
- As a reminder in 2023, April PGP physical pricing dropped 19cpp from the March high of 60cpp and then May dropped an additional 6cpp. This was after 5 straight months of increases where PGP went from 28cpp to 60cpp (an increase of 114%). In the most recent run up PGP only went from 31cpp to 55cpp (an increase of 77%) in 6 months so our price decrease estimates for the next months do not have as steep a drop off than what transpired last spring.
Polypropylene
- It’s the same story for PP, certain grades of widespec homopolymer are selling at a discount to the contract PGP price because the supply/demand dynamics are not strong enough for the product to trade at a premium to contract PGP. The widespec PP grades that may command a premium to contract PGP will be higher melt and/or higher izod impact copolymers along with higher melt HomoPP (say north of 20 melt).
- What’s interesting of late is that there has been less product of the very low-end grade 4 types and the higher melt, higher izod impact CoPP types available in the market. Now these two types of PP products are on opposite ends of the widespec pricing range but their limited availability leads us at BlueClover to wonder if PP producers have lowered operating rates even further to reduce the impact of high feedstock pricing.