Resin Price Report: Houston Storm a Prelude to Hyperactive Hurricane Season?

Resin demand surged at the start of the week on May 13, with NPE2024 in the rear-view mirror and buyers aggressively looking for material. Several waves of prime polyethylene (PE) and polypropylene (PP) railcar offers met initial needs and a high volume of resin transacted across the PlasticsExchange’s marketplace, the resin clearinghouse reports in its Market Update. However, offers seemed to dry up midweek and there was considerable unfilled demand still to cover.

Spot resin prices were widely mixed, with PE ranging from a penny lower to a penny higher depending on grade. PP prices stemmed their slide and recorded their first penny gain since the beginning of March.

Houston storm a timely reminder.

On May 16, a deadly storm hit the Houston area, knocking out power to around one million people, temporarily shutting the port of Houston, and closing area warehouses the next day. No long-lasting issues with resin reactors were reported, but the storm did serve as a timely reminder that hurricane season officially starts at the beginning of June. Meteorologists just revised their forecasts upward to a hyperactive season, citing very warm waters already in the gulf and the reversal of El Nino to La Nina conditions. This could bring a positive North Atlantic Oscillation, essentially an ongoing high-pressure system that steers storms to the south and west, toward Florida and the Gulf Coast. La Nina also tends to reverse the high wind shearing lid that can break up developing storms like we saw in 2023, so heads up, cautions the PlasticsExchange.

PE resin prices teeter-totter.

Spot PE trading improved substantially compared with NPE week, and with business back to normal, completed volumes at the PlasticsExchange were well above traditional averages, as anticipated. Deals were struck across all commodity PE grades, with low-density (LD) PE for film getting the most buyer interest.

Pricing was a mixed bag, however, with high-density (HD) PE for film and injection slipping a penny amid more plentiful supplies, while injection grades of LDPE and linear-low-density (LLD) PE picked up a penny as resin remained scarce and better demand developed. Prices for the traditional highest volume commodity grades, including HD for blow molding and LD and LLD for film, held steady.

Freight rates from Asia to the Americas continued to rise and shipping delays increased, so export demand remained strong. Pushback on pricing from international buyers continued, which complicated incremental export sales as Houston prices remained steady and prompt availability was tight. 

April PE contracts were a bit messy, according to the PlasticsExchange. The two leading indices reported different results: One assessed prices up $0.03/lb, awarding producers with their price increase, while the other rolled its prices flat for the month. Spot PE prices at the PlasticsExchange averaged down a cent in April. The domestic market has been fairly firm and tightly supplied in May, so it would not be surprising to see the $0.03/lb increase become fully implemented this month, according to the PlasticsExchange. 

Demand for PP comes up against limited availability.

PP trading maintained a heightened pace. Spot demand from both processors and resellers remained very good against limited availability for many grades, especially high-flow and high-impact material. While low-flow and transitional homo- and copolymer PP continued to languish in the market, good-quality off-grade cars have been selling swiftly.

Prime homo- and copolymer PP prices added a cent — the first weekly gain in two months. The increase comes as monomer costs firmed amid additional propane dehydrogenation (PDH) issues. Given the volatility of monomer costs and ample reactor capacity, producers have been pushing spot prime railcars on a polymer-grade propylene (PGP) plus basis, similar to contract pricing, which has been somewhat challenging for one-off transactions. There has been substantial ongoing PP demand from Mexican buyers; few other locations can afford North American PP given its relatively high monomer cost.

Upcoming May PGP contracts are still set to settle with a decrease, but the level of relief has shrunk as spot monomer prices have bounced a few cents from their low. On the contract front, there is a three-cent margin increase on the table for May, which other producers are expected to support. This increase could offset buyers’ savings from a small PGP contract decrease. As a reminder, PP contracts declined a full dime in April.

Water restrictions in Mexico lead to force majeure.

A little over half of Mexico is experiencing severe, extreme, or exceptional drought, reports the Mexico News Daily. The Ineos Styrolution facility in Altamira, a petrochemicals hub in the state of Tamaulipas, declared a force majeure on May 20 because of water restrictions imposed by the authorities, reports business intelligence firm ICIS.

“Tamaulipas, on Mexico’s east coast, is an industrial export-intensive state bordering the US; any reduction in operations due to water shortages could mean a large financial hit to companies,” writes ICIS. The state reportedly is prioritizing human water consumption and is cutting in half water supply for industrial use.

Read the full Market Update on the PlasticsExchange website.