Resin markets end August in bearish mood

Spot resin trading activity remains heightened, and the week of August 24 brought a better balance between polyethylene (PE) and polypropylene (PP) transactions, writes the PlasticsExchange in its weekly Market Update. A relatively abundant quantity of PE flowed into the market and prices were mostly lower. PP prices were steady to a bit weaker, though we are still only seeing spurts of surplus supply, note PlasticsExchange analysts. Consequently, that spot market cannot be considered liquid, not even for commodity PP grades. While energy prices recovered, monomer markets were mixed and international resin prices continue to slide. The sum total of these events continues to weigh on the market, with overall sentiment bordering on bearish.

The spot ethylene market saw a volatile week, falling down initially near the cycle low of $0.22/lb before staging a solid comeback. August ethylene ticked higher and higher in a series of transactions, reports the PlasticsExchange, reaching above $0.26/lb midweek as a very high volume of material changed hands. The market continued to rise, peaking near $0.28/lb before settling back around $0.25/lb, for a net penny gain.

Spot PE trading was above average, as material availability continued to grow, pushing prices lower. All commodity PE grades have been readily available for immediate shipment at well-discounted prices, according to the PlasticsExchange. Spot buyers in need of material were pleased to pick away given the lower costs, while contract buyers eyed another decrease for September. Although most PE producers offered to decrease August contracts by $0.03/lb, processors sought additional relief. Spot prices were already down at least $0.05/lb, with Houston prices quite a bit weaker, and several producers agreed to a larger decline of $0.05/lb in late August. International PE prices are still well below domestic levels. With domestic prices at such a premium, it will be hard to roll contract prices over in September, so another decrease could be forthcoming.

The spot propylene market was lightly traded and prices fell further. The only outright physical PGP transaction was for September delivery at $0.2625/lb, almost $0.02/lb below the last level where August PGP had sold. With August essentially over, this September transaction represents a new low prompt PGP price for this cycle and a full $0.50/lb below the peak in October 2014.

PP market conditions continue to be characterized by limited availability and good demand, yet prices are still falling as monomer costs crumble, dragging down contracts, reports the PlasticsExchange. Spot prices have been sliding too, particularly for off grade. After many years of minimal margin, PP producers are now having some time in the sun, as they exploit these market conditions to expand margins. Although PGP contracts dropped $0.035/lb in August, producers are trying to get a net $0.015/lb price increase, but it is well contested. As we have seen throughout 2015, there will likely be a range of results based on individual negotiations and even before this nickel we have seen margins expand at least a dime.

To read the full Market Update, go to the PlasticsExchange website.