Spot resin trading was active during the first part of June, but the pace slackened ahead of the extended July 4th holiday weekend, reports the PlasticsExchange in its weekly Market Update. Some deeply discounted month-end specials did change hands, however, and processors nabbed truckload shipments they needed in order to run through the holiday.
Prime polyethylene (PE) and polypropylene (PP) prices again averaged flat at the PlasticsExchange marketplace the week of June 26, though some consolidation came into view. The low end of the market seemed to clean up into the end of the second quarter, while PE contracts trimmed $0.03/lb during June and PP producers shared their $0.04/lb polymer-grade propylene (PGP) related cost savings this month with resin buyers. The PlasticsExchange expects PE and PP railcar availability to remain relatively robust in July. It does advise processors to take advantage of the multi-year low prices and stock a supply buffer in case nasty hurricane winds churn up in the gulf again this year.
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High-density PE a major mover
PE trading was somewhat subdued as the second quarter came to a close. Spot supplies were sporadic, as most producers had already concluded the bulk of their June business. Others had some railcars to sell, with off grade more prevalent than prime. High-density (HD) PE was the major mover for the week; low-density (LD) PE also was quite active. Spot PE prices held steady for a fourth straight week. This might be a cycle floor or just a tiered step for another leg lower. Time will tell. PE spot levels in June were down a penny across the resin clearinghouse’s marketplace.
PE contract prices decline
As expected, June contracts decreased $0.03/lb, although producers now have a $0.03/lb increase on the table for July. PE contracts are still up $0.03/lb for the year. This was the first decline of 2023 despite a glut of domestic inventory, even at reduced operating rates and weak international PE markets, which have dragged down Houston and export prices. “Even with the June PE contract decrease, a wide disconnect remains compared with the spot market,” writes the PlasticsExchange. “For instance, our benchmark spot HDPE Blow Molding contract began the year at $0.57/lb, reached as high as $0.63/lb by March 9, and has since dropped a dime to the current level of $0.53/lb.” While contract prices are up a net $0.03/lb for the first half of 2023, spot prices are now down a net $0.04/lb during the same period.
Deep off-grade PP discounts dry up
PP trading activity was about average the final week of June, as many buyers kept to the sidelines having already met their sourcing requirements earlier in the month. The flow of railcars also slowed and some of the deeply discounted off-grade offers dried up. Demand for packaged truckloads was strong, as processors complained about late railcars and the need for last-minute deliveries to fill in supply gaps. Spot prices held firm for the third straight week, as participants digested the June $0.04/lb price decrease and took a look ahead into the summer market with concern for weather-related production disruptions.
Benchmark spot homo-polymer PP contracts began the year at $0.56/lb, rallied as high as $0.69/lb by the March 9 peak, and then fell a total of $0.16/lb to end the first half of 2023 at $0.53/lb. PP contracts rose $0.26/lb during the first quarter and fell $0.23/lb during the second quarter. Contrary to PE spot pricing, which has been more volatile than contracts, spot PP has been surprisingly stable this year. “Hmm . . . imagine that!” comments the PlasticsExchange.
Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website. For a recap of resin pricing and activity in June 2023, read this analysis by Zachary Moore from business intelligence firm ICIS.