Resin Price Report: Bargain Prices in Spot Market Energize Buyers

After a slow start to the week of June 12, resin trading began to heat up mid-week and ended with a flurry of orders. Buyers and sellers tapped the PlasticsExchange spot market ready to make deals, which were much easier to close than the previous week. In fact, completed volumes were among the highest of the year.

Transactions were generally for multiple truckloads or railcars, a notable change from much of 2023 when processors sought to reduce inventory and typically ordered minimal volumes. After rallying during the first quarter, spot prices have tumbled the past two to three months. They are now well discounted compared with contract levels, providing processors with excellent buying opportunities, reports the PlasticsExchange in its Market Update.

Commodity PE, PP resin prices hold steady

After fairly steady erosion, commodity polyethylene (PE) and polypropylene (PP) prices finally stemmed their slide and held firm. “We are sensing a positive change in sentiment away from distinctly bearish, but it is too early to say if we are seeing early signs of bottoming action for this leg of the cycle or just an interim uptick in demand,” said the PlasticsExchange.

PE trading had its busiest week of the year, with deals spread across all key commodity resins. Demand for low-density (LD) PE surged in both Film and Injection grades; high-density (HD) PE and linear-low-density (LLD) PE were good movers, too, and almost kept pace. Spot PE prices had been dropping consistently on the heels of heavy supplies and weak export prices, but prices finally managed to stabilize last week. LLDPE Injection even posted a penny gain. Preliminary data released by the American Chemistry Council (ACC) showed an increase in May PE production, though operating rates still only ran at 85%. Domestic and export sales were a little above average, but it was still not enough to move all the resin that was made, so collective producer inventories built for a third straight month to the highest level since July 2022. For a detailed look, subscribe to the ACC for actual supply/demand figures.

Object lesson in index slippage

Some contract buyers have expressed frustration with the major indices that held PE contracts flat in May, maintaining $0.06/lb of 2023 increases even as spot prices reduced for the year amid very ample supplies. For those that wonder how index slippage occurs to necessitate those infamous non-market adjustments, well, this is a perfect example, said the PlasticsExchange.

Spot prime prices at the PlasticsExchange have given up more than their first-quarter gains and are now down an average of $0.04/lb for the year. This has led some processors to dive into the spot market for well-priced resin, plenty of which still remains, both Prime and off grade, in bulk railcars and packaged truckloads. There is technically another $0.03/lb increase on the table for June, but this will be pushed off until July.

Regardless of supply/demand conditions, it makes sense to have price increases nominated throughout the hurricane season, which is already underway, should a major storm disrupt production. This is also a good reminder for resin processors to keep an inventory buffer on hand, recommends the PlasticsExchange. We have seen time and time again how quickly surplus material can dry up and a market go from loose to tight, notes the resin clearinghouse in its weekly report.

Off-grade PP discount to Prime expands

PP trading activity was swift: Widespec railcars continued to flow while prime supplies began to tighten as monomer prices rebounded. PP demand improved, helping Prime prices hold steady after losing ground the past several weeks (and months), but off-grade pricing was still soft so its discount to prime expanded. Transactions were plentiful, with homo copolymer PP high melt for both Injection and Melt Blown applications leading the way. Prime copolymer PP sales came in close behind.

The first quarter is usually when we see strong demand, which did not happen this year. May sales were the best so far of 2023 and June is looking good, so it is very possible that seasonal buying has just shifted back a few months, according to the PlasticsExchange. Downstream resin and finished goods inventories have been reduced over the past three quarters, and processors seem to be replenishing those stocks now that resin prices have come back down again. Generally speaking, most PP grades can be found in railcar quantities and at favorable prices. Suppliers had been chasing orders but low-ball bids for Prime were quickly turned down last week. 

Meanwhile, the Phillips 66 force majeure at its refinery in New Jersey will strain PP availability for the foreseeable future. June PP contracts are still expected to decrease a bit, but with monomer prices bouncing back from early month lows, more modest cost relief is now trending.

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 May 2023, read this analysis by Zachary Moore from business intelligence firm ICIS.