Resin Price Report: Lull in Resin Trading as NPE Holds Court

Few fresh polyethylene (PE) and polypropylene (PP) railcar offers were made available to the spot market during NPE week, but the short-staffed PlasticsExchange trading desk did fill a number of relatively urgent truckload needs the week of May 6, reports the resin clearinghouse in its Market Update.

Historically, resin pricing is pressured when the plastics industry convenes at a major conference, as transparency is enhanced and competitive situations are created. The NPE event in Orlando, FL, however, almost seemed to have an opposite effect, writes the PlasticsExchange. The show saw a huge influx of international resin buyers —  processors as well as traders and distributors — and that leant support to the market. They came eager to buy and establish new sourcing channels to access North American PE, which is derived from competitively priced ethane/ethylene feedstocks, as most of the new capacity built in the last seven years was always intended to be exported, according to the PlasticsExchange, which had a booth at the show. “It was our company's eighth NPE, and it was the best that we have experienced, with many thanks to all of the fine folks that we met with at the show,” writes the PlasticsExchange.

PE trading falls short.

Spot PE trading was muted last week as many market participants attended NPE. As expected, completed volumes fell short of traditional averages at the PlasticsExchange, which said that it expects activity to pick back up after the show. While there was considerable export demand at NPE, without a steady flow of offers, high-volume deals were challenging to complete last week. Fresh offers started to roll in on May 10, and the PlasticsExchange said it was happy to be a net buyer, as it has started to strategically restock. April PE contracts became more complex as competing indices took different positions, leaving questions about final April pricing more than a week into May.

$0.03/lb price increase on the table.

One major index posted up $0.03/lb for the month, endorsing producers’ price increase effort. Another index, which had projected flat a couple of weeks ago, maintained its position despite surely being pressured to revise higher. It was a rare divergence, but PlasticsExchange analysts said they happen to agree that domestic pricing has been mostly steady during April, with its prices actually averaging down one cent. It’s very possible that the $0.03/lb increase could become fully implemented by the end of May, it added.

PE exports slip below 45%.

Meanwhile, preliminary supply/demand data released by the American Chemistry Council (ACC) for April showed that producers throttled back their reactors, making about 250 million fewer pounds than the record levels reached in March. Export sales also retracted, slipping below 45% of total PE sales for the first time in a year. There was a small reaction lag to drop export prices quickly enough to stay competitive internationally, as global PE prices eased along with naphtha during April. However, exports were still historically robust with more than one million metric tons of material sold to offshore destinations.

Domestic PE sales stayed strong and tallied 7% above the 12-month average. When the dust settled, there was a very modest decline in collective producer resin inventories. Readers are encouraged to subscribe directly to the ACC for more detailed supply/demand data.

Buyers swoop in for PP railcar deals.

Spot PP trading activity slowed as industry players at NPE were more focused on long-term business than short-term operations. But deals continued to be done, particularly late in the week when a flurry of railcar offers rolled in, most of which were scooped up fairly quickly as resellers were short of material to fill customer commitments. This has been a continuing trend over the past six weeks as orders were taken expecting better availability at lower prices, given unwinding of the polymer-grade propylene (PGP) rally, according to the PlasticsExchange. However, spot availability was modest during much of April — processors upped their direct orders since contract prices were plunging a dime, soaking up most of the large surplus that developed in March and leaving little for spot sales. Resellers’ PP inventories are still very thin and there is a substantial premium for ready-to-ship truckloads compared to fresh railcars, which are starting to flow a little faster.  

The PlasticsExchange said in its Market Update that it had liquidated most of its prime PP market-making inventories as PP prices were peaking in March and held back from making significant net purchases until prices corrected. “We began to restock in a more meaningful way this past week and plan to continue replenishing our market-making stocks as stellar opportunities present themselves. Though a few more pennies could still come out of the market, we feel that most of the PP price break is already behind us, as upstream inventories have been drawn and monomer found support in the low $0.40s/lb and have staged a minor bounce,” writes the PlasticsExchange. May PGP contracts could shed $0.02 to 0.03/lb, but producers are also looking for a $0.03/lb margin increase, which could be an offsetting factor for May PP contracts.

PP resin production at lowest point since December 2022.

According to the ACC, domestic demand in April was up a solid 3% more than the trailing 12-month average, just as producers were cutting operating rates back below 74%, to make the least amount of PP resin since December 2022. Apart from Mexico, exports were lackluster given the relatively high price of PP resin, though imports were cut as incoming ocean freight rates rose as domestic PP prices plunged, closing the arbitrage. When April ended, upstream inventories had drawn down a large 7% and the market feels tight. Additional capacity is still expected to come later this year when Formosa brings its 550 million lb line on stream in Point Comfort, TX. The company said mechanical work on the new line will be complete this month with commission expected sometime in the third quarter.

Read the full Market Update on the PlasticsExchange website.