Spot prices for prime polyethylene (PE) and polypropylene (PP) held flat last week, as a combination of ample supply, poor demand, and global economic concerns weighed on the market. Still, for producers that’s an improvement over the recent pummeling that spot resin prices have taken, writes the PlasticsExchange in its Market Update.

The lack of price movement is not necessarily an indication that PE and PP have found a floor yet, especially considering the glut of supply still stuck in warehouses across the country, but mostly in Houston. It is, indeed, an uphill battle for producers to clear out excess material. The PlasticsExchange cites early industry data for July that indicates further upstream inventory growth for PE and PP, and by maintaining high reactor operating rates, producers are not helping themselves at all. It may be a while or take a major hurricane or significant production disruption before the dynamic shifts away from resin buyers and back into the hands of producers.

Despite having pricing power, buyers still face long delivery lead times, as rail congestion remains an issue. The rail embargo into California has improved somewhat, but not enough, as suppliers must still apply for permits to ship cars. Prompt packaged availability for some PE and PP grades are also constrained, though most resins are available in railcar quantities with a few weeks notice.

Moderate demand for PE

PE trading was moderately active amid flat pricing the week of Aug. 8. The PlasticsExchange reported a more normal flow of inquiries, adding, however, that the closing ratio left something to be desired. The increase in activity saw material change hands across all PE commodity grades in its marketplace, with low-density (LD) PE Film as the primary mover. Large volumes of resin for verified export were again seen at deeply discounted prices. There was good availability of fresh off-grade railcars for domestic shipment, though fewer Generic Prime cars were seen this past week.

The mountain of PE supply has only grown, as early industry data for July has shown an increase in inventory for LD and high-density (HD) PE. Additional capacity is on the way, too, as Shell confirmed construction completed at its ethane cracker and PE plant in Pennsylvania, and run rates at the facility are expected to be at full capacity sometime in Q4. The material overhang has impacted resellers, who have reduced on-hand inventories and were offering cars with minimal margin rather than turning back resin to producers or taking on additional stocks.

In the meantime, increases remain on the table for August at $0.05/lb and September at $0.06/lb. With negative sentiment still in place, the increases are generally seen as a protective measure as the hurricane season has yet to hit its stride during the typically more active August to October timeframe. Hexane and metallocene remain in short supply, with a force majeure for hexene linear-low density and medium density still in place.

Prime PP resin prices hold firm

The PP market was slightly more active, as prime prices held firm alongside stable polymer-grade propylene (PGP) levels, according to the Chicago-based resin clearinghouse. Still, the off-grade PP market has yet to clean up, as there was another heavy flow of railcars that ranged in quality.

The constant pelting of off-grade railcars at ever-competitive pricing has provided processors the confidence to buy only as needed. This type of activity has driven just-in-time demand, and Prime packaged truckloads of co- and homo-polymer PP were the biggest movers at the PlasticsExchange trading desk. Sales drew down stocks to the point that fresh railcar purchases were required to refill its market making inventories. “While we are not outright bullish on the market, at the right price, we felt the risk/reward was valid,” notes the Market Update.

Meanwhile, with nary an export market outside of Mexico, producers still face the uphill battle of reducing inventories, which went from below average to above average in just one month amid high operating rates and new production capacity. Firm PGP prices currently point to a modest two- to three-cent cost-push increase for August contracts. But there is still plenty of time for potential change before contracts settle.

Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website.

In other resin-related news

Domestic plastic resin production posts monthly decline

US production of major plastic resins totaled 7.7 billion pounds during June 2022, a decrease of 6.3% compared with the prior month, and a decrease of 4.1% compared with the same month in 2021, according to statistics released this week by the American Chemistry Council (ACC). Year-to-date production was 47.6 billion pounds, a 6.8% increase compared with the same period in 2021.

Sales and captive (internal) use of major plastic resins totaled 7.7 billion pounds during June 2022, a decrease of 4.3% compared with the prior month and a decrease of 2.0% from the same month one year earlier. Year-to-date sales and captive use were 47.1 billion pounds, a 6.4% increase compared with the same period in 2021.

Growing appetite for EVOH resin in food packaging

The market for ethylene-vinyl alcohol copolymer (EVOH) resin is projected to increase from $576.17 billion in 2021 to $770.2 billion by 2028, reaching a 4.4% compound annual growth rate during that time frame, according to a new report from Insight Partners. EVOH is used in food packaging, where its barrier and antistatic properties are highly valued.

“EVOH resins help maintain the freshness of food and increase the shelf life of food products. Another major factor driving the demand for EVOH resins is people's preference for packed food products and beverages,” writes Insight Partners in the report. In the United States, in particular, growing online sales are increasing demand for EVOH resin–based packaging.

In the report, the EVOH resins market is segmented into films, trays, bottles, and bag-in-box, among other food applications.

In 2021, Asia Pacific held the largest share of EVOH resin for food applications, according to Insight Partners. That market is expected to open many untapped opportunities, driven by population growth, rising per-capita income, and consumer awareness of packaging to ensure safe food consumption. Furthermore, China has emerged as a manufacturing hub for EVOH resin packaging, which is also contributing to market growth, according to the business research firm.

For more information on the EVOH Resins Market report, visit the Insight Partners website.