Resin Price Report: Bullish Market Gains Momentum

Spot resin continued to transact at a rapid pace the week of Aug. 7, and prices for all polyethylene (PE) and polypropylene (PP) grades added $0.01/lb, as the burgeoning bullish sentiment noted in last week’s Resin Price Report gained more steam.

Completed volumes at the PlasticsExchange again ran above the average seen so far in 2023, with PE the more actively traded material, reports the resin clearinghouse in its Market Update. Processors bought to attend to their near-term needs as well as to replenish inventories now that the bottom of this market cycle seems to be intact. The low end of the pricing spectrum has firmed up an average of 3 to 4 cents, even a nickel, depending on grade, according to the PlasticsExchange. Low-ball buyers continued to search for mid-July pricing in vain, and some reluctantly returned to pay up in price.

Some grades already sold out

Spot supplies have been noticeably tighter the past several weeks, and some producers were already sold out of certain grades for the month, prompting some resellers to tap the PlasticsExchange's spot market for available railcars. Truckload demand was strong, but resellers’ stocks were thin and buyers paid a premium for prompt material to fill in supply gaps from late purchases and slowly moving railcars.

Even as producers ramp up reactor rates, strong export demand from Latin America, Asia, and Europe has been soaking up surplus supplies, lifting the floor price in Houston, which in turn has lent support to the domestic spot Prime and off-grade markets.

All PE grades rise a cent

PE trading remained solid for a second straight week with robust volume changing hands across the PlasticsExchange’s marketplace. Ultimately, a 1-cent gain took hold on all PE grades because of stronger demand and limited fresh offers. Linear-low-density (LLD) PE for Injection and Film were the most preferred resins, while low-density (LD) PE resins for Film and high-density (HD) PE for Blow Molding were also quite active. Production issues have made high-molecular-weight Film grades scarce, thus complicating sales.

Exceptionally strong export sales with still unfilled incremental demand has allowed producers to raise Houston prices by several cents in August, with nearly similar gains seen in the domestic spot market. The American Chemistry Council (ACC) has released preliminary supply/demand data for July, which revealed that PE exports smashed the previous all-time record, which had only stood since June, and that exports are approaching 50% of total PE sales. PE reactors have also been working harder; in July, they ran in the high 80s as a percentage of growing capacity and made more than five billion pounds of resin for only the second time in history. Domestic sales, however, have not quite kept up: In July they slipped 6% below the trailing 24-month average. All told, production exceeded sales and there was a modest increase in producers’ collective inventories, but given the accelerated export growth, the market still seems fairly snug. The PlasticsExchange recommends that interested parties subscribe to the ACC for more detailed fundamental data.

PP trading picks up

PP trading improved from the relatively slow first week of August, writes the PlasticsExchange in its Market Update. Spot supplies have been tightening, and with fewer railcars offered to the market, buyers have become more aggressive in their search for material. The subtle change in pricing power has been noticeable — even though monomer prices have softened a tad, spot PP prices have cleaned up off their bottom. Prime PP prices rose another penny this week, while off-grade resins, which had been running at a very steep discount, have made bigger gains, recouping at least several cents from the low.

If producers want to keep this little upswing intact and turn it into a real rally, they might need to keep their reactors in check. According to the ACC, PP production in July jumped back above 1.5 billion lb to the highest level since July 2022. While exports remained healthy — above 5% of total sales — domestic demand slumped a bit after two months of strong processor buying.

Upstream PP inventories grew moderately, but remain 100 million lb below April levels. The market feels much more balanced after PP prices corrected from their steep first-quarter gains, and buyers have become more engaged. It will be interesting to see how the market develops from here, but please keep in mind that forecasters are now calling for an above-average hurricane season, cautions the PlasticsExchange.

Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website. For a recap of resin pricing and activity in July 2023, read this analysis by Zachary Moore from business intelligence firm ICIS.