Resin Price Report: Emboldened Sellers Push for Nickel Increase on PE Contracts

Commodity resin trading at the PlasticsExchange maintained a steady pace last week amid tighter availability, elevated monomer costs, and strong export demand. Spot prime polyethylene (PE) and polypropylene (PP) railcar offers were relatively scarce and off-grade railcar specs were usually less desirable, reports the resin clearinghouse in its Market Update.

Reseller stocks were generally thin and somewhat picked over, but with thorough searching most commodity grades could be sourced at current competitive — albeit rising — prices. 

The run on resin sparked another weekly increase in pricing, with prime PE and PP grades jumping at least another penny. With the sustained rally adding support, producers are still seeking their five-cent increase for February PE contracts, while heightened polymer-grade propylene (PGP) monomer costs have February PP contracts poised for another increase, too.

Export markets remained hot though some of the initial panic buying driven by the Red Sea logistics disruptions has subsided, according to the PlasticsExchange. Overall international market sentiment remains bullish and it will be interesting to see if strong Asian buying returns as the Lunar New Year festivities end.

PE exports tighten domestic supplies

PE trading accelerated mid-month and was well-represented among commodity-grade resins as well as rotomolding resin and EVA. Export sales had been trending higher already and have been further helped by ongoing logistical issues the past few months. This has given producers additional demand and at rising prices, providing them with happy outlets for incremental pounds while keeping the resin off the domestic market. This alternative demand has soaked up surplus resin and tightened domestic supplies, which has been placing upward pressure on domestic prices.

High-density PE Film jumps two cents

Most prime PE grades at the PlasticsExchange added a penny this past week, while high-density PE Film, which has been in particularly short supply, jumped two cents. This overall rally in PE is in line with expectations as international resin prices have firmed alongside rising freight costs. The increase in PE spot levels so far this month has encouraged producers to stand firmly in favor of enforcing another nickel increase in February after successfully implementing a $0.05/lb hike in January.

Preliminary supply/demand data for January was released by the American Chemistry Council (ACC) and it revealed that PE production and domestic sales were both 2% higher than the trailing 12-month average. Exports continued to astound, as they ran 6.5% above the 12-month average. They were notably 480 million pounds above January 2023. Altogether this brought a mild draw from upstream PE stocks, although high-density PE inventories have now drawn for six straight months, peeling back to the tightest levels since March 2023. For a more detailed look, readers are invited to subscribe directly to the ACC.

Ineos force majeure still in place

PP availability has gotten a bit more snug, especially with the Ineos force majeure still in place and another major producer at reduced run rates. Prices for prime homo- and copolymer PP rose another penny, despite a pause in the PGP rally, with costs even pulling back a bit. Much of the older reseller inventories that hung over the market are cleaning up. The PlasticsExchange said it saw other resellers, many of whom were caught short of material, compete for railcars that drove off-grade prices higher. Processors aggressively bought spot copolymer PP priced below their contract levels, which will see an imminent cost-push increase in February, now gravitating toward $0.04/lb. Homo-polymer PP was a big mover, too, especially to Mexico, although most sales were restricted to prime.

January data released by the ACC showed dramatically reduced operating rates, nearing 70%, which yielded the lowest PP production since December 2022. Domestic sales were 2% higher than the 12-month average, while exports were strong at almost 10% above average. When the dust settled, there was a hefty upstream inventory draw of 138 million pounds during January, and the lack of resin has been noticeable this month.

Read the full Market Update on the PlasticsExchange website.

Epic hurricane season ahead?

The return of La Niña and warm water across the Atlantic Ocean is raising serious and growing concerns about hurricane season this year, according to Jonathan Porter, chief meteorologist at AccuWeather.

Water temperatures in the Main Development Region of the Atlantic Ocean, where most of the major hurricanes develop, are a “staggering 65% higher than the next closest year, said Porter. The combination of historically warm water and a building La Niña, which may not develop until late summer or early autumn, has the potential makings of a blockbuster hurricane season, according to AccuWeather.