Resin Price Report: Heightened Demand Leaves Some Buyers Hanging

Spot resin trading remained elevated just ahead of Memorial Day. Completed volumes were once again well above average, reports the PlasticsExchange in its Market Update, and while some of that pent-up demand was satisfied, the week ended with a variety of unfilled buy orders still open.

Benchmark pricing at the resin clearinghouse held steady for the week, although the lower end of the market firmed up and consolidated toward the higher end. Overall availability of polyethylene (PE) and polypropylene (PP) has been snug, and generic prime and good off-grade railcars continue to get snatched up quickly, as long as the price is right. However, much cheaper, less desirable, and transitional PP offers have been sticking around.

Above-normal hurricane season on horizon.

Both resellers and exporters are still short of material, as producers have been selling a higher percentage of their resin directly, both domestic and abroad. Middle-market inventories are very thin, prompting a run on spot packaged material to carry processors until railcars arrive. Some of the heavy buying the week of May 20 also came ahead of the start of hurricane season, which begins June 1. The National Oceanic and Atmospheric Administration (NOAA) predicts an 85% chance that we will see an above-normal hurricane season, citing a convergence of near-historic warm sea temperatures and a La Niña pattern. Just a couple of weeks ago, the Houston area dodged a bullet with a deadly storm that knocked out power for a million people in the region.

Strong demand for all commodity PE resins.

The spot PE market was busy last week: A steady flow of buyer inquiries poured in, and if the price fit, transactions between buyers and sellers flowed fairly smoothly. All commodity PE resin groups faced strong demand, and completed volumes at the PlasticsExchange ran high.

Linear-low-density PE for film was the biggest mover, followed by high-density PE for blow mold and then injection. Lower-end buyers had to pay up for material, as exports of incremental supply still reigned supreme, leaving relatively little for domestic bottom feeders. International buyers have tried to drag down sellers to chase their lower bids, but they were mostly unsuccessfull. 

Freight rates from Asia continue to escalate, as do shipping delays, making US-based sellers with limited material disinterested at such sales levels and prompting international buyers to return for a reliable US supply with quick shipping to Latin America and Europe.

The PlasticsExchange said it has been a net buyer of prime PE, as it seeks to restock its market-making inventories on the little price break, and will continue to do so as opportunities present themselves. “We are not runaway bullish, but feel that there is some upside ahead with solid demand as a tailwind for liquidity, if necessary,” it writes in the Market Update.

The domestic contract market is still a bit nervous, as the two largest indices diverged on pricing in April: One remained flat to March and the other rose $0.03/lb, supporting producers’ price increase initiatives.

PP spot prices relatively flat.

Spot prices at the PlasticsExchange, on the other hand, have stayed relatively flat with an upward bias. PP trading maintained its heightened pace, evenly spread between copolymer and homo-polymer PP, with Prime well-outstripping off-grade sales. Official Prime PP prices held steady at the PlasticsExchange last week, but there was an uptick in off-grade levels. High-flow copolymer PP resins are still tightly supplied and command a sizable premium to other PP resins. Upstream PP inventories were drawn down sharply in April, but remain relatively healthy — some of the resin is earmarked for supply during turnarounds.

There were several mid-month surges of Prime railcar offers, as producers looked to increase operating rates with polymer-grade propylene (PGP) feedstocks priced in the very low $0.40s/lb. The resin price was workable for export; however, those resin deals came and went in a heartbeat and have not been repeatable, as the initial sales need was satisfied while monomer also ticked higher.

Upcoming May PGP contracts are still set to settle a little lower, and the PlasticsExchange said it anticipates a PGP-related decrease of around $0.02/lb to be passed through, although a three-cent margin increase for PP resin is also on the table and would offset buyer cost savings, if implemented.

Propane dehydrogenation (PDH)  issues remain and are expected to continue into next month, which probably will keep PGP costs from seeing a sharp decline even into seasonally soft June.

Read the full Market Update on the PlasticsExchange website.