ISM Commodity Corner 1Q – 2015 Report - ISM

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Welcome to the…
ISM – New York Commodity Corner
First Quarter 2015 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
15.00
150.00
145.00
140.00
135.00
130.00
125.00
120.00
115.00
110.00
105.00
100.00
95.00
90.00
85.00
80.00
75.00
70.00
65.00
60.00
55.00
50.00
45.00
40.00
35.00
30.00
25.00
20.00
15.00
10.00
Natural Gas ($ / MM BTU)
13.00
11.00
9.00
7.00
5.00
3.00
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
1.00
WTI ($ / barrel)
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:
1Q2014 @ $98.66/bbl
4Q2014 @ $73.04/bbl
1Q2015 @ $48.91/bbl (a decrease of 33% from prior calendar quarter and a 50.4%
decrease calendar period to period)
FY2011 @ $94.54/bbl
FY2012 @ $94.21/bbl
FY2013 @ $98.01/bbl
FY2014 @ $93.01/bbl
Estimated FY 2015 @ $52.29/bbl (an estimated 43.8% year on year projected decrease)
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:
1Q2014 @ $4.95/MMBtu
4Q2014 @ $4.05/MMBtu
1Q2015 @ $2.98/MMBtu (a decrease of 26.4% from prior calendar quarter and a 39.8%
decrease calendar period to period)
FY2011 @ $4.05/MMBtu
FY2012 @ $2.79/MMBtu
FY2013 @ $3.66/MMBtu
FY2014 @ $4.44/MMBtu
Estimated FY2015 @ $2.65/MMBtu (an estimated 40.3% year on year decrease)
ISM - N.Y. Commodity Index
10.50
9.50
Index
8.50
7.50
6.50
5.50
4.50
3.50
2.50
1.50
0.50
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.
Current Summary:
1Q2014 @ $.483/lb
4Q2014 @ $.448/lb
1Q2015 @ $.348/lb (a 22.3% decrease from prior calendar quarter and a 28% decrease
calendar period to period)
FY2011 @ $.543/lb
FY2012 @ $.483/lb
FY2013 @ $.467/lb
FY2014 @ $.480/lb
Estimated FY2015 @ $.352/lb (a projected 26.7% year on year decrease)


Ethylene market “somewhat” in balance, with near term projections basically flat
to $.01/lb movement.
An additional “incremental” ethylene cracker construction has been announced,
for mid - 2018 startup; bringing the total new ethylene units under construction in
the US to 7.
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.
Current Summary:
1Q2014 @ $.842/lb
4Q2014 @ $.852/lb
1Q2015 @ $.742/lb (a 12.9% decrease from prior calendar quarter and a 11.9% decrease
calendar period to period)
FY2011 @ $.708/lb
FY2012 @ $.688/lb
FY2013 @ $.77/lb
FY2014 @ $.853/lb
Estimated FY2015 @ $.739/lb (a projected 13.4% decrease year on year)
 HDPE prices remain unchanged over the last several months; near term swings (if
any) would be in an approximate $.05/lb band.
 Globally, HDPE resin markets have begun to “tighten”, specifically in Europe and
Asia; North America continues to suffer some logistical challenges in the Gulf
and West Coast.
 Industry operating rate for April at 92.1%, and days of supply decreased by 3
days, down to 26.5.
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.
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).
Current Summary:
1Q2014 @ $.818/lb
4Q2014 @ $.72/lb
1Q2015 @ $.623/lb (a 13.5% decrease from prior calendar quarter and a 23.8% decrease
calendar period to period)
FY2011 @ $.961/lb
FY2012 @ $.906/lb
FY2013 @ $.876/lb
FY2014 @ $.79/lb
Estimated FY2015 @ $.653/lb (a projected 17.3% year on year decrease)
 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
 Near term pricing is expected to rise based on anti-dumping regulation (still
pending), increased PTA feedstock costs, off-line capacity due to a plant
explosion in China and overall lower inventories (water bottle season).
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.
Current Summary:
 USA 99.7% Kosher quality refined glycerine spot pricing:
March 2015 @ $.45/lb
End 2015 estimated at $.50/lb
 Europe 99.7% Kosher quality refined glycerine spot pricing:
March 2015 @ EUR 530/pmt
End 2015 estimated at EUR 600/pmt
 USA 99.5% technical quality refined glycerine spot price:
March 2015 @ $.36/lb
End 2015 estimated at $.39/lb
 Europe 99.5% technical quality refined glycerine spot price:
March 2015 @ EUR 450/pmt
End 2015 estimated at EUR 480/pmt
 USA 80% crude glycerine spot price for refining:
March 2015 @ $.10/lb
End 2015 estimated at $.12/lb
 Europe 80% crude glycerine spot price for refining:
March 2015 @ EUR 275/pmt
End 2015 estimated at EUR 330/pmt
 Estimates based on 1 Euro Dollar = $1.12 US
 Glycerine pricing recovered from the low reached mid Q4, 2014, increasing
through the back half of Q4 and into Q1, 2015.
 Strong demand for refined glycerine accelerating from China.
 Inventories in US are declining; the strength of the US economy will be a clear
driver of global glycerine markets.
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.
Current Summary:
1Q2014 @ $770/tn list price
4Q2014 @ $770/tn list price
1Q2015 @ $770/tn list price (flat from prior calendar quarter and from calendar period to
period)
FY2011 @ $670/tn list price
FY2012 @ $687/tn list price
FY2013 @ $758/tn list price
FY2014 @ $770/tn list price
Estimated FY2015 @ $770/tn list price (flat year on year)
 Consumption for containerboard is up .3% on an annualized basis vs Q4, 2014.
 Consumption is forecast to grow 1 – 2% for both calendar years 2015 and 2016.
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