Over the last year natural gas prices have seen a steady increase over crude oil prices.
It appears that OPEC production cuts have had a greater effect on boosting natural gas markets as U.S. suppliers have quickly responded to fill in the supply void. The boost in commodity markets due to the turnover in the U.S. administration has flattened back down and analysts polled by the Financial Times have taken off their doomsday tinfoil hats on oil markets. Reuters reports that credit markets may be the real culprit which would mean that commodity markets have more stable fundamentals.
What does this mean for virgin resin and scrap pricing? Factories utilizing natural gas feedstock for their crackers may face a growing cost margin relative to their distillate feedstock counterparts. Plastics consumers may be interested in shopping around for new inputs if their supply chain is heavily dependent on resins produced from natural gas. The prompt for this look came from ExxonMobil Chemical Co.’s recent completion of the mechanicals works for new PE production lines in Texas. Plastics News reports that these lines will have nearly 3 billion pounds of capacity with production beginning during Q3 2017. Also reported was a quote from an ExxonMobil press release.
“As an early mover to complete a PE project fueled by the shale gas revolution, this world-scale, state-of-the-art facility will double the plant’s production capacity, making it one of the largest PE plants in the world.”
According to PetroChemWire, HDPE bottles have been fluctuating (+/- $0.025 per pound) over recent weeks with PET bottles seeing a slight decline (-$0.005 per pound). Regrind PP also saw a slight rise over this time period while other grades remained flat. Plastics News reports a bit gloomier trend in recycled plastics with HDPE down -$0.04 and PET down -$0.02 per pound over the last two months.
Infrastructure building and rosy news forecasts seem to run counter to pricing reductions seen over the last few months. The oversupply due to market obstacles such as China’s National Sword program may constrain margins even further. While environmental measures should prompt market adaptations toward innovative recycling and reuse systems, there seems to be a considerable consumer preference for convenience that many analysts refuse to acknowledge. With food preparation companies increasing utilizing plastic film as an example among many factors, the recycling stream is still morphing. A technological value-added step may be needed to pry open profit margins as the standard supply/demand analysis continues to point toward consumer demand for immediate convenience.