Resin Price Report: More Markdowns Ahead of Expected Rebound in the New YearResin Price Report: More Markdowns Ahead of Expected Rebound in the New Year

With Thanksgiving in the rear-view mirror in the United States, commodity resin trading racked up another busy week. Prime material was marked down another penny across the board, as softer polyethylene (PE) prices worked their way through the market, and polypropylene (PP) followed polymer-grade propylene (PGP) lower, reports the PlasticsExchange in its Market Update for the week of Dec. 2.

Another spurt of Prime offers appeared early in the week, which seemed to be the tail end of a wave of resin during the past couple of months as producers liquidated inventories, particularly into the export market. The once heavy flow has diminished, and these fresh offers did not last long with pent-up demand waiting to be filled, notes the PlasticsExchange.

PE export prices rise

At least two major producers raised their December PE export prices by $0.02 to 0.03/lb. While there was initial pushback, most of the resin sold quickly. By the end of the week, Prime offers were reduced to a trickle while off-grade continued to be available. By the end of the week on Dec. 6, demand remained unsatisfied.

The PlasticsExchange said it expects to see more sporadic discounted deals before the end of the year. “There will still be some stellar buying opportunities ahead, but most producers have indicated that their seasonal purge is essentially over. After decreasing October PE contracts by $0.03/lb, producers managed to stave off growing calls for additional contract relief in November. While December PE increase efforts have been abandoned, a clear message was also sent that the tide is turning, as substantial increases were nominated for January, mostly $0.07/lb, though a nickel was also seen,” writes the resin clearinghouse.

PP contract prices decline

November PP contracts fell $0.035/lb, commensurate with the decline in PGP monomer costs. They are expected to drop a bit more in December, although producers are also gearing up for a January increase, according to the PlasticsExchange.

PE maintained its stance as the dominant traded resin during the week. Heavy volumes once again were above usual levels at the PlasticsExchange, helped in part by the continuation of high-volume offers priced to move.

The majority of completed orders were for export, as producers targeted robust demand from a variety of international regions, while limiting domestic offers as local buyer interest, while good, was less enthusiastic.

Chinese buyers continued to soak up low-density PE at prices similar to domestic US levels, leaving little surplus to sell and with no need to discount. There has been a rush to ship material for arrival before the Chinese New Year, which begins at the end of January. US sellers are also incentivized to clear out resin to avoid year-end inventory tax burdens.

PE reactors on overdrive as maintenance season looms

Ethylene prices have been rising, even though crackers are operating well, which indicates that producers are running their PE reactors hard while also likely building monomer and resin stocks ahead of a busy first-quarter maintenance season, according to the PlasticsExchange. Houston-area warehouses are still jammed full, and it seems that this trend will persist for a while.

Despite record inventories, producers appear intent to reverse the downward pricing cycle come January, backed by large $0.05 to 0.07/lb increases. After several months of reduced domestic sales, the PlasticsExchange said it expects to see processor demand improve along with some restocking efforts when the calendar turns. The positive feelings are further inspired by the incoming administration’s policies, which encourage US manufacturing. In the meantime, most of December still lies ahead.

PP resin prices at lowest point of the year

PP business rebounded from the slow showing seen a week earlier. Spot prices continued to slide, as still-falling monomer costs were passed downstream. There was a typical flow of off-grade railcars with a smattering of Prime, and some producers were seeking volume orders to fill out their December reactor schedule. Processor demand improved somewhat, as these prices — now the lowest of the year — have been deemed compelling enough to support large-volume buys. Reseller demand also improved: Packaged truckloads were needed to fill in supply gaps while others were procuring railcars to hold for January sales.

Third straight monthly decline in PP contracts

November PP contracts confirmed a third straight monthly price decrease, falling $0.035/lb to bring the total three-month decline to $0.145/lb, keeping pace with the drop in monomer. Weak December demand forecasts had producers pitching excess monomer as they throttle back operating rates — this has kept pressure on spot PGP prices and currently indicates another moderate decrease for December.

January monomer prices are currently $0.02 to 0.03/lb higher than spot, and if the January premium extends through the month, it should inspire better PP buying as participants look to load up at the bottom. In turn, this would bring stronger spot railcar orders and, if extra production is needed, more demand for monomer and — voila! — a cycle change come January. But the month is still young — let’s see how it plays out.

To read the full Market Update, including reports on monomer trading and the major energy markets, go to the PlasticsExchange website.