Resin Price Report: Force Majeures on Copolymer PP Stifle Supply
A new force majeure declared by Invista is exacerbating the shortage and driving buyers to the spot resin market.
July 30, 2024
The lazy summer vibe at the PlasticsExchange resin trading desk we chronicled in last week’s column carried over into the week of July 22.
Spot Prime polyethylene (PE) and polypropylene (PP) prices were mildly mixed last week, with most PE grades peeling off a half cent, while PP was steady to higher, supported by another force majeure declaration, reports the PlasticsExchange in its Market Update. The flow of Prime railcars improved a bit, but PE producers remained adamant about implementing at least the $0.03/lb increase, which had rolled over from June, and their asking prices continued to reflect it. There is an additional $0.10/lb of PE increases on the table through August, which could come into play if the hurricane season lives up to meteorologists’ predictions.
Buyers line up for copolymer PP cars as prices climb
PP railcar offers continued to trickle in, and buyers competed for good copolymer PP cars as prices climbed. Good off-grade homo-polymer PP sold with some effort, while rough or transitional resin was generally undesired. July PP contracts will follow polymer-grade propylene (PGP) up a nickel, bringing the two-month gain to $0.07/lb. Export requests flowed in, but transactions were more difficult to conclude, writes the PlasticsExchange. Though export availability was limited, buyers pushed back heavily at any increase during July and most sought a discount, encouraged by more competitive offers from China, which have been enabled by easing international freight rates.
Mild start to hurricane season could turn ugly
Hurricane Beryl aside, it has been a mild start to the 2024 hurricane season, partly caused by a large Saharan dust plume that prevented new storms from developing during the past month. The dry dust has been moving west and now seems to be abating. A new small storm formation, albeit with limited potential, recently popped up heading toward the Caribbean. A high-pressure system in the north could keep the new storm from re-curving back into the Atlantic so it will likely stay south. If it truly develops, it could hold course into the hot Gulf of Mexico waters.
Most meteorologists predict that the summer storm season will heat up in the coming weeks and that it will be severe. A series of storms — or even a single major one — could disrupt petrochemical and plastics production to create supply challenges. The PlasticsExchange recommends erring on the side of caution and keeping an extra inventory buffer on hand, just in case.
Domestic PE sales outstrip exports
PE trading maintained a moderate pace last week and domestic deals outstripped export sales at the trading desk. More truckload volume was transacted than railcars, as shipping delays encouraged quick shipments of packaged resin. High-density PE was the main mover last week, spread across Film, Blow Mold, and Injection grades. Prime PE pricing was mixed with most grades down a half-cent, though lower volume linear-low-density PE Injection and granular grades held firm; scarce low-density PE Injection garnered a penny increase.
Export business was softer due to competitive offers out of China. North American producers might need to be agile with export pricing to remain competitive on incremental sales and maintain market share or reduce reactor rates to keep burdensome inventories from developing. Despite softer export markets, there is a very good chance that a $0.03/lb increase will be implemented for domestic PE contracts in July, as supplies remain relatively tight. Spot offers remain at an elevated level, and with ethylene prices at a two-year high, there is some upward cost-push pressure at hand, according to the PlasticsExchange.
The PP market was a tale of two grades last week: Homo-polymer PP sales waned as processors worked through the heavy volumes of resin procured during May and June, while copolymer PP sales, both railcars and packaged truckloads, more than made up for it.
Ineos declares force majeure
Copolymer supply has been tight for the past several months and a new force majeure declared by Ineos on its copolymer PP resins only exacerbated the shortage and sent buyers to the spot market to grab available, well-priced lots. Invista is not expected to bring its copolymer PP line back up until at least mid-August, and Heartland is not expected to produce copolymer PP until late Q4. Homo-polymer PP prices at the PlasticsExchange held flat last week, while copolymer PP moved higher, further expanding its premium. Still, prime PP cars that were priced on a monomer-plus basis seemed expensive, especially if the margin-enhancing increase was tacked on. According to the American Chemistry Council (ACC), PP sales in May and June 2024 had the strongest two-month period since July/August 2021. However, PP sales lost some gusto a couple of weeks ago, when PGP prices were climbing, as supportive PP export sales seemed to hit a wall at the higher price level.
PP resin contracts up $0.05/lb
This probably contributed to the interim PGP peak seen in mid-July, as it seems that PP producers throttled back operating rates and, instead, sold off some monomer. In the meantime, July PGP monomer and PP resin contracts will both confirm up $0.05/lb. August monomer is already trending a little lower, so it will be interesting to see if contract PP demand has another surge by mid-August if a moderate contract decrease appears imminent. This could coincide with the start of the more active part of the summer hurricane season. August also happens to be a seasonally strong PP sales month. This could get interesting, so stay tuned.
To read the full Market Update, go to the PlasticsExchange website.
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