The plastics gods must have been smiling on resin producers, as they pulled off a miracle by pushing through a $0.03/lb increase on polyethylene (PE) contracts in March. The deed was done without the support of overly robust domestic demand or a strong spot market. In its Market Update, the PlasticsExchange confessed that it did not feel the increase taking hold. “In fact, prices across our platform actually slipped a tad late in the month, but we have plenty of inventory on hand, which should catch a nice bounce, so who are we to complain?”
Some credit for the price increase must go to a fourth active force majeure affecting PE — Nova’s cracker in Corunna — joining the likes of CPChem and Ineos, said the Chicago-based resin clearinghouse.
PE producers have another nickel increase on the table for April. The PlasticsExchange noted that rarely, if ever, in 23 years in business has it seen a PE decrease immediately follow an increase, so at the very least, the $0.06/lb gained during the first quarter should endure for now.
Overall spot resin activity was a tad lighter last week in truncated trading, as participants started to clear out Thursday afternoon for a long holiday weekend. Prime PE prices held firm but did not advance in light of the March implementation. Polypropylene (PP) peeled off another penny, as polymer-grade propylene (PGP) monomer prices continued to unwind.
Processors restock as resin prices steady
Discounted PP offers did find favor with some buyers who have been restocking now that prices have been subsiding. Other buyers were still cautious, taking a wait-and-see approach amid the shaky global economic outlook. Still, PE export offers began the month higher, supported by strong top-of-the supply chain Crude Oil prices, which packed on another $5/bbl this past week. The ports of Los Angeles and Long Beach were largely shut due to a shortage of workers on the Good Friday holiday, though operations were expected to resume as usual after the weekend. This was not an official strike, but it does serve as a stark reminder of what is possible on the logistics front in the event of a work stoppage, said the PlasticsExchange. Union workers have been without an employment contract since July 2022.
Spot PE trading pulled back as buyers largely covered their spot needs with discounted offers at the end of March. High-density PE for Blow Molding and Injection changed hands the most last week, followed by low-density PE for Film and Injection. There was relatively little interest in linear-low-density PE, according to the PlasticsExchange.
Force majeure conditions constrain PE production
The flow of fresh railcars was also light, as PE production remained constrained because of force majeure conditions, even as some reactors have returned on stream, because some upstream inventories need to be rebuilt. Additionally, there was a good purge of off-grade resin as the quarter came to a close, reducing the pressure to show material to the spot market early in the month. The lack of resin offers will help to reinforce the validity of the March $0.03/lb increase and keep buyers’ focused on the April $0.05/lb increase, which now comes into play.
Eroding spot PGP prices hit PP market
PP trading got off to a good start in April, but it still fell short of the pace seen in late March. Participants took a step back as they weighed the effect that eroding spot PGP prices could have on the resin market.
Spot PP prices slid another cent, reacting to the unraveling of the sharp first-quarter PGP monomer rally. A hefty volume of PP changed hands last week at the PlasticsExchange, which it attributes to processors’ restocking at sharp prices and some buying ahead to fill all their April needs and into May. Completed business was slanted toward co-polymer PP, which continued to hold a nickel premium to homo-polymer PP as it remains more readily available.
March PP contracts have mostly settled up $0.08/lb, passing through the same PGP cost-push contract increase. First quarter contract gains were $0.26/lb for PGP minus some minor margin contraction, which varied by producer. At least one PP producer is seeking a $0.03/lb margin-enhancing increase for April. This PP price increase, if implemented, could somewhat offset a cost-led price decrease, which seems imminent — this month’s PGP contracts are already setting up for a big break, which at the moment, points to a double-digit magnitude.
Read the full Market Update, including more news about PGP pricing and energy futures, on the PlasticsExchange website.