Resin Price Report: Downward Pricing Trend Expected to Hit Bottom This MonthResin Price Report: Downward Pricing Trend Expected to Hit Bottom This Month

Spot resin trading returned to a much more active pace following a lull in transactions the week of Nov. 11, reports the PlasticsExchange in its Market Update. While eager to transact, sellers were less apt to chase lowball bids and held to their asking price. More often than not, buyers came back and agreed to their price.

PE prices hold firm

While some deeper discounts made appearances, spot polyethylene (PE) prices seem to have found fair value and have held firm for two weeks in a row, notes the PlasticsExchange reporting on the week of Nov. 18. Polypropylene (PP) prices, by contrast, shed another two cents, aligned with polymer-grade propylene (PGP) monomer costs, which continued to trend lower. Buyers did not necessarily press for lower prices, but were happy that they were available: Most of them seemed pleased that levels have receded as hard as they did the past 10 to 12 weeks, according to the PlasticsExchange.

PE sales exceeded PP at the resin clearinghouse, and in a rare occurrence, more exports were booked than domestic orders by volume. Export PE demand was widespread with numerous deals done to Europe, the Mediterranean region, Africa, Mexico, South America, and China. PP exports were also solid but restricted to Mexico.

Record levels of PE inventories

PE trading rebounded significantly from a rather lackluster outing just a week earlier. Domestic buyers scooped up generic Prime and off-grade railcars for December usage and some restocking, while international buyers grabbed large-volume Prime purchases for December sailings as producers purged material. As special deals for certain grades sold out, new offers from other producers and different grades seemed to emerge, writes the PlasticsExchange. The discounted offers have come in waves, rather than a big flood of material all at once. 

Upstream PE inventories entered November at record levels and the ongoing surge in export business will challenge Houston-area warehouses’ operational capacity, as many remain packed to the gills.

Producers seem determined to end the streak of monthly domestic contract decreases to one, after the $0.03/lb relief granted in October. It is very possible that spot prices could slide a bit more in the next few weeks, but it seems that selling pressure could also end early this year, and the PlasticsExchange expects to see the market move higher in January. In the meantime, there are still plenty of great deals to be had.

Spot PP trading picks up

Spot PP trading also picked up considerably the week of Nov. 18. The influx of business came alongside lower pricing, as homo- and copolymer PP grades peeled off a couple more cents, eyeing the erosion of PGP costs, which will work its way downstream.

Demand for packaged truckloads remained strong, as railcars in transit continued to lag, and Houston and other warehouses across the nation face packaging delays. The slide in spot levels this month has out-paced the expected decrease of three to four cents for upcoming November PP contracts, which leaves more downside ahead for this month.

Prices poised to hit bottom

The PlasticsExchange expects prices to bottom out in December. “While a three- to four-cent drop may keep more downward price pressure on the table and will likely affect late-month resin demand, it does help PP producers capture an extra penny or two on current month sales even as they concede some loss of prompt incremental volume,” writes the PlasticsExchange. Its market-making team has been buying extra PP for December shipments, as it anticipates a year-end pricing cycle switch and upswing come January.

Final data released by the American Chemistry Council (ACC) this week confirmed that PP inventory was down 22 million pounds, as producers lowered run rates and production slightly while improving domestic and export sales to reduce supply positions. For more detailed analysis, readers are encouraged to subscribe to the ACC.

The full Market Update is available on the PlasticsExchange website.