Spot resin trading remained active last week, but it was off the previous week's pace — the best week of the year, so far, at the PlasticsExchange trading desk — as many market participants got a jump on the long Memorial Day weekend.
Domestic demand showed marked improvement during May: As prices moved lower, spot market deals multiplied, reports the PlasticsExchange in its Market Update. Railcar availability remained quite good for polyethylene (PE) and polypropylene (PP), and prime resin prices peeled off another penny or two. Resellers, in general, have thinned their on-hand stocks. Export interest stayed solid, though weak global demand and competitive offers from Asia into Latin America as well as from the Middle East and Russia into Europe have created challenges for incremental export sales from the United States. Houston prices softened, as traders anticipate lower June offers intended to regain market leadership.
PE grades drop a couple of cents
The PE market was slightly less active last week, as traders began to wind down for the month. All PE grades dropped a couple of cents on the week, and some buyers that had been holding out took advantage of these discounts with well-timed purchases. High-density (HD) PE was the major mover, with injection grades leading the charge, followed closely by blow molding materials. Low-density (LD) PE film business picked back up after a couple weeks of scant interest, with some scattered linear-low-density (LLD) PE trades peppered in, as well
PE resin contracts flat, at best
Despite a nickel nomination, May PE contracts are expected to be flat at best. In fact, they are more likely to lose $0.03/lb, according to the PlasticsExchange, which would erase the unpopular $0.03/lb increase garnered in March. If so, contracts will still be up $0.03/lb for the year while most PE grades have given back their gains in the spot market. Regardless of the ultimate May settlement, producers will attempt a price increase in June, albeit a gentler $0.03/lb push. Some product allocations remain in place, but overall supplies are more than adequate and Shell's new PE facility in Pennsylvania, which had gone offline, is back.
Spot PP resin demand softens
After a month of robust buying, spot PP demand pulled back last week, as processors had seemingly already satisfied most of their monthly requirements. Nonetheless, producers continued to offer a healthy flow of discounted railcars into the spot market, and buyers only picked away, resulting in another penny loss across co-polymer (Co) and homo-polymer (Ho) PP grades. Once again, railcar business surpassed truckloads, and CoPP was more sought after. It held on to its six-cent spot premium to HoPP, which saw limited interest.
After four months of upstream inventory builds, PP is considered well-supplied. Processors that resisted high-volume purchases during the fierce first-quarter rally, have been rewarded with stellar buying opportunities during the second quarter. May PP contracts should finalize with an $0.08/lb decrease in line with PGP cost relief, according to the PlasticsExchange. The two-month April and May price break of $0.19/lb leaves just seven cents of cost-push increases intact from Q1 as we head into June.
Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website.