West Texas Oil vs NYMEX Natural Gas ($ / MM btu) Jul-08. Jan-07. Jan-05. Jan-08. Jan-09. Jan-06. Jan-10. Jul-07. Jul-05. Jul-10. Jul-06.

Transcription

1 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Natural Gas ($ / MM BTU) WTI ($ / barrel) Welcome to the ISM New York Commodity Corner Fourth Quarter 2016 Report It is our intent to provide you with historic commodity pricing information, define trends, discuss forecasts, and most of all, to help develop insights regarding materials pricing. Commodities will be updated each calendar quarter, or as the specific need arises. We hope you find this information useful and we are open to suggestions and questions to make this more relevant to your needs. Please send your questions and comments to: info@ismnewyork.org Crude Oil & Natural Gas West Texas Oil vs NYMEX Natural Gas ($ / MM btu) Natural Gas WTI Crude Oil Cost Drivers: World-wide supply and demand balance, gasoline refining conditions in the US, regional/geopolitical instability and issues, commodity investment/speculation, global and local weather, OPEC statements and actions. Current Pricing Summary:

2 $42.13/bbl $45.03/bbl $49.55/bbl (an increase of 10% from prior calendar quarter and an increase of 17.6% calendar period to period) $94.54/bbl $94.21/bbl $98.01/bbl $93.01/bbl $48.88/bbl $43.38/bbl Estimated FY $55.25/bbl (an estimated 27.4% increase from 2016 actual) Natural Gas Cost Drivers: Natural Gas is largely a domestic natural resource. Cost drivers are supply / demand, weather, and to some extent, sympathetic movement to oil, in particular given its recent volatility. Current Pricing Summary: $2.93/MMBtu $2.82/MMBtu $2.98/MMBtu (an increase of 5.7% from prior calendar quarter and a 1.7% increase calendar period to period) $4.05/MMBtu $2.79/MMBtu $3.66/MMBtu $4.44/MMBtu $2.67/MMBtu $2.46/MMBtu Estimated $3.45/MMBtu (an estimated 40% increase from 2016 actual)

3 Index ISM - N.Y. Commodity Index Linerboard HDPE Edible Tallow Crude Oil Ethylene PET Ethylene Where Used: About 70% of North America s ethylene production is derived from natural gas (30% from crude oil). Ethylene is the building block for a variety of the plastics we use daily, as well as solvents, surfactants, and other significant chemical feedstocks. Cost Drivers: Although tied to natural gas and oil costs, ethylene is also subject to supply / demand swings, and in particular to the operating efficiency of the production facilities. Downstream end products (plastics, solvents, glycols, etc) can compete for the available pounds of ethylene, thus driving ethylene pricing. $.275/lb $.33/lb $.327/lb (flat from prior calendar quarter and a 18.9% increase calendar period to period) $.543/lb $.483/lb $.467/lb $.480/lb $.317/lb $.307/lb

4 Estimated $.3202/lb (a projected 4.3% increase from 2016 actual) Market has tightened over the last month or so. Tightening is due to three units under turnaround and some unplanned outages. Additional market demand due to producers with polymer plants coming on line prior to their olefin units (relying on purchased ethylene). Combined effect of the above two points will push pricing higher in the near term. HDPE Where Used: High density polyethylene is used in a wide variety of applications, including plastic milk containers, liquid detergent bottles, etc., and industrial applications such as plastic pipe for natural gas transmission and many automotive parts. Cost Drivers: High density polyethylene is heavily influenced by the factors driving ethylene costs, and it also has its own supply / demand cost influences. $.685/lb $.742/lb $.748/lb (a 1% increase from prior calendar quarter and a 9.2% increase calendar period to period) $.708/lb $.688/lb $.77/lb $.853/lb $.728/lb $.718/lb Estimated $.72/lb (basically flat from 2016 actual) HDPE plant startup scheduled for 4Q16 start, now delayed to mid-2017 start. PE exports at second highest ever in Dec 2016, with billion pounds shipped out. Add higher oil pricing and colder than anticipated weather, to the above two points, resulting in a tighter market with some near term pricing pressure. PET Where Used: This is the plastic used to make soda bottles, water bottles and plastic beer bottles, and is also used in the manufacture of carpeting and clothing.

5 Cost Drivers: PET pricing is tied to ethylene glycol and to xylene markets, supply / demand balances and it has historically had a seasonal influence (increased consumption during the summer due to water and soda bottle demand). $.627/lb $.588/lb $.608/lb (an increase of 3.4% from prior calendar quarter and a 3% decrease calendar period to period) $.961/lb $.906/lb $.876/lb $.79/lb $.655/lb $.591/lb Estimated $.642/lb (a projected 8.6% increase from 2016 actual) Historically, this summary has been based on the mid-size buyer price index, which has been discontinued in favor of a new large buyer formula and market based index The PET market was basically flat last Oct/Nov, with a 2.5cpp jump in Dec. January pricing shows a 5cpp non-market adjustment (downward) combined with an increase in raw materials, netting at a 3cpp decline since Dec closing price. Glycerine Where Used: Glycerine is used in cosmetics, foods, pharmaceuticals, and a variety of personal care and oral care products, as well as in other applications including animal feed, antifreeze and certain energy uses. Cost Drivers: As glycerine is a byproduct of the production of other products, its cost is principally driven by the demand for glycerine for its various uses the supply remains driven largely by the production of other products such as biodiesel fuels, soaps, fatty alcohols, and fatty acids. Over the past few years the increasing use of biodiesel as a fuel in Europe, and increasing volumes in North America, has resulted in significant increases in the supply of byproduct glycerine globally, which will help drive the glycerine markets. USA 99.7% Kosher quality glycerine spot pricing: Dec $.30/lb Mid estimated at $.30/lb. Europe 99.7% Kosher quality glycerine spot pricing: Dec EUR 485/pmt

6 Mid estimated at EUR 530/pmt USA 99.5% technical grade glycerine spot price: Dec $.25/lb Mid estimated at $.26/lb. Europe 99.5% technical grade glycerine spot price: Dec EUR 450/pmt Mid estimated at EUR 500/pmt. USA 80% crude glycerine spot price for refining: Dec $.08/lb Mid estimated at $.06/lb. Europe 80% crude glycerine spot price for refining: Dec EUR 230/pmt Mid estimated at EUR 260/pmt Estimates based on 1 Euro Dollar = $1.05 US 2016 has been a rough year for glycerine producers, prices have been on the low side throughout the year, in spite of poor production in historically price-leading markets such as Europe and SE Asia. Linerboard Where Used: Linerboard is the main component and cost driver in the manufacture of corrugated shipping containers, which are used in a broad variety of consumer industries such as food and beverage, as well as the automotive industry. Cost Drivers: Linerboard is heavily influenced by supply / demand balances, inventories, conversion cost (energy), exports and industry consolidation. $770/tn list price $755/tn list price $795/tn list price (an increase of 5.3% from prior calendar quarter and an increase of 3.2% calendar period to period) $670/tn list price $687/tn list price $758/tn list price $770/tn list price $770/tn list price $765/tn list price Estimated $813/tn list price (a projected 6.3% increase from 2016 actual)

7 The market finished 2016 with corrugated shipments up 2.1%; the largest annual increase in shipments since Containerboard consumption at box plants (also called cut-up) which reflects shipments, waste in conversion, and other uses of corrugated sheets, grew by 2.7% shows forecasted growth of 2% in box shipments. Forecasts show another $25/tn increase in pricing between 2 nd and 3 rd quarters of 2017.