Resin Price Report: August Comes in with a Bullish Bang

The headline of our last Resin Price Report read, “Price Erosion May Have Hit Bottom.” Trading activity in the first week of August would seem to support that view, as it was one of the busiest of the year at the PlasticsExchange. “Completed volumes were nicely above average as bearish sentiment has melted away and we might already be peeking past neutral toward mildly bullish,” writes the resin clearinghouse in its Market Update. It does add a caveat, however, noting that the market has had an erratic year, with lengthy slow periods punctuated by several short-term demand surges. “We will see if this one gains momentum,” comments the PlasticsExchange.

Demand was fueled by some processors seeking to satisfy their typical needs early in the month, while others bought packaged truckloads to fill in supply gaps caused by late railcars. Still others, including resellers, bought resin to replenish depleted inventories.

More plentiful Prime railcar offerings

Wide-spec availability remained relatively tight and the bottom part of the pricing spectrum continued to shore up the week of Aug. 1. Prime railcar offerings improved somewhat to begin the month, as several resellers offered parts of their forecasted August supply into the spot market to augment their company’s direct sales, reports the PlasticsExchange. Based on limited spot availability, it seems that both polyethylene (PE) and polypropylene (PP) producers maintained their reduced reactor rates through July while exporting surplus supplies.

PE resin prices hold steady

A healthy volume of PE resin transacted across the PlasticExchange marketplace, and average prices held steady with a firm undertone. Traders scooped up several railcars of Film-grade low-density PE on the final day of July, and business accelerated when August began on Tuesday. The PlasticsExchange reports that it sold several railcars of high-density PE Blow Mold export, and some prompt Injection-grade truckloads were completed in the domestic market. Linear-low-density PE for Film and Injection also changed hands in the domestic and export markets; more transactions would have been made if additional well-priced offers were available.

The market for off-grade PE railcars has been firming; low-ball bidders have been disappointed as the bottom of the market has cleaned up several cents.

Robust export activity

The export market has remained hot with strong buying seen from Asia, Latin America, and Europe. Producers have raised August Houston asking prices by $0.03 to 0.05/lb and supplies are snug. A couple of major indices rolled their prices flat again for July, while unofficial discounts and non-market adjustments pile up, adding confusion to domestic pricing.

Producers have nominated a nickel increase for August contracts. That could have made sense if the $0.03/lb decrease had officially gone through in either June or July, but contracts still sit up $0.03/lb for the year while spot prices have sagged, writes the PlasticsExchange.

There have been several named storms so far, but none that have threatened the Gulf. Forecasters still predict a very active hurricane season ahead.

PP availability tightens

PP trading was fine, but paled in comparison with the more active PE market. PP co-polymer remained in hot demand, especially high-flow and No Break resins. Spot supplies of these materials for immediate shipment have become very scarce, though with operating rates still throttled back hard, producers will gladly accept additional railcar orders for fresh August production. PP availability has tightened and off-grade prices for both homo- and co-polymer PP have firmed a couple of cents from the bottom, as processors scour the market for great deals to replenish inventories, consolidating overall pricing.

PP contracts followed polymer-grade propylene (PGP) contracts to roll flat in July and remain up $0.03/lb for the year. As noted last week, contract PP pricing will continue to take its lead from upstream PGP. A stronger spot market could lend strength to proposed 3-cent increases for August, according to the PlasticsExchange, especially since producers have exercised production discipline while direct domestic and export sales stay strong. The PlasticsExchange recommends adding a little inventory buffer at these favorable prices — there is limited downside, given the potential of a production disruption in the heart of the hurricane season.

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.