Resin Price Report: PE Contracts Absorb $0.05/lb Increase

If there were any doubts that we were well into the dog days of summer, tepid demand in the spot resin markets the week of Aug. 5 confirmed it. The torpor was disrupted momentarily when an unwinding of the Japanese yen shook the global financial markets. The markets recovered, but an extra sense of caution persisted, reports the PlasticsExchange in its Market Update. 

Monomer prices rallied further last week, providing cost-push support to pricing, but buying activity has slowed the past several weeks, sapping some of the upward pricing momentum. Domestic processors seem to be working through abundant purchases made during the past several months, some for normal processing but also to replenish drawn-down inventories.

Export demand also lost some of its vigor, as more competitive offers emerged from Asia. A relative relaxation of freight rates from the region helped spur transactions, although the rates are still fairly high and shipping delays persist. Shipping delays in the domestic market also continue, supporting a steady flow of truckload demand as processors wait for late railcars to arrive, notes the PlasticsExchange.

Tropical Storm Debby avoided the petrochemicals/plastics producing part of the Gulf. Instead, it hit Florida and shot up the East Coast, wreaking havoc along the way. Another storm is brewing in the Atlantic that is gaining steam and worth watching.

Summer trading lull comes late

Polyethylene (PE) trading pulled back a bit last week at the PlasticsExchange. It is very typical to see a summer slowdown, but it usually comes at the end of June/beginning of July, and it appears to have pushed back a month this year, said the resin clearinghouse.

Spot PE prices averaged out steady, ranging from a half-cent lower to a penny higher, with some staying steady, and all based on grade. Some materials remained fairly scarce and commanded premiums in the spot market, including low-density (LD) PE for injection, linear-low-density (LLD) PE pellet and granular for injection/compounding, and to a certain extent high-density (HD) PE for blow molding.

The rest of the commodity resins could be considered amply available, but no Prime PE was seen as oversupplied, said the PlasticsExchange. Even HDPE for injection, which had been loose, has seen supplies tighten considerably as producers shift their production slate toward higher value grades. This has also been seen from Gulf PE producers wrestling with the cost of ethylene, which is at its highest in years because of a series of cracker issues (as reported in last week’s Resin Price Report column).

Sizable contract PE price increase

PE producers took advantage of favorable supply/demand dynamics in July, some spurred by Hurricane Beryl–induced disruptions, to implement a sizable price increase on July contracts. The PlasticsExchange commented that it felt the $0.03/lb increase that had failed to take hold in June would find success in July, although it said it was a little surprised to see the major indices award a full $0.05/lb increase for the month. “It seemed a bit rich as the export market has lost some of its incremental demand, which had been buoying domestic prices, but no complaints from our trading desk as we still hold a sizable supply of market-making inventory,” the PlasticsExchange writes in its Market Update. There is another nickel increase on the table for August contracts and “we would not be surprised to see another increase nominated for September as the hurricane season moves toward its peak months,” added the resin clearinghouse.

Spot PP prices reach new heights

Polypropylene (PP) maintained its modest trading pace while spot prices continued to rise: Homo-polymer PP (HoPP) added a half-cent and copolymer PP (CoPP) picked up another penny, reaching new highs in this market cycle. The PP market is supported by a combination of limited resin availability at both the reseller and producer levels, along with rising polymer-grade propylene (PGP) monomer costs, which also soared to new highs.

In a reversal from the previous week, HoPP sales outshone CoPP, though strong underlying copolymer demand remains unsatisfied. Sales volumes would have been higher if more well-priced resin was available. CoPP supplies, which had already been snug, were further hampered by an Ineos force majeure, while Invista still has a line down, too. There is a lack of good off-grade and Prime material, particularly 20 melt No Break, 35 melt Random Clarified, and 35-60 melt 2+ izod resins.

Preliminary data recently released by the American Chemistry Council (ACC) for July showed that, despite minor early-month production disruptions caused by Hurricane Beryl, resin reactors actually ran quite well, producing the most PP in three years.

PP exports soften

PP exports dropped a smidge from June but remained elevated, while domestic sales continued to thrive, tallying above the 12-month average for the fourth straight month amid strong processor throughput and downstream inventory building, reports the PlasticsExchange. When the dust settled, there was a negligible upstream inventory build, which still snugly sits more than 200 million pounds below March levels. Readers interested in more detailed production and sales data are encouraged to subscribe to the ACC.

PP contracts were up $0.07/lb over the past two months, including a sizable $0.05/lb in July. Spot PGP prices took a dip several weeks ago, giving hope for some August price relief, but the monomer market has come roaring back. Not only did it erase the $0.025/lb discount August previously held to July, but it now points to a $0.025/lb increase for this month based on current spot levels. That said, the month is still young, and we will keep our eyes on the prices in forthcoming resin reports.

Read the complete Market Update, which includes insights on ethylene and propylene pricing as well as trends in the energy markets, on the PlasticsExchange website.