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December 20, 2023
4 Min Read
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At a Glance
- Buyers flocked to market to secure resin last week
- Sellers continue to offer discounts to move material before the end of the year
- Spot PP resin prices rise another cent
Strong domestic demand and solid export interest are making December the second best month of the year, just behind October, at the PlasticsExchange.
Export interest remained good, with the best buying coming from Mexico, reports the resin clearinghouse in its Market Update. Domestically, deeply discounted polyethylene (PE) deals began to dry up, though some remained at week’s end. Rising polymer-grade propylene (PGP) costs fueled by ongoing monomer production disruptions dashed polypropylene (PP) processors’ hopes for December relief, which sent buyers to the market to secure resin. Prime resin prices took divergent paths: PE sliced off a half-cent while PP tacked on another penny. Forward prices at the PlasticsExchange for first quarter PE and PP resins both rose an additional penny, placing January prices $0.02/lb above December.
Potential drop in December PE contracts
PE contracts could easily see a decrease in December, perhaps peeling off the last $0.03/lb implemented in September, as producers have already rolled their current nomination into January. Transactional prices are well below levels reflecting the $0.09/lb increase that the major indices have recorded so far in 2023. PP contracts are now tracking more toward a rollover rather than a decrease, as monomer costs have firmed back up.
More end-of-year buying opportunities expected in Houston market
PE trading slowed compared to the buying frenzy at the start of the month, but the flow of transactions was still good as prices eased, reports the PlasticsExchange. Commodity supplies remained abundant and sellers kept discounting to move material before the end of the year. By Dec. 15, many of the sharply priced railcars had sold, but some offers will carry over into this week and be available until they’re gone. Trading was well spread across all PE grades, with high-density PE Blow Mold and linear-low-density PE Film seeing the bulk of completed business. With two weeks left before the end of the year, additional buying opportunities are expected to be available in the Houston market, as dealers try to unload more packaged material to avoid year-end inventory taxes. Meanwhile, the decline in domestic and export pricing makes a December contract increase even more unlikely — it may even drop $0.03/lb, according to the PlasticsExchange. A decrease would be justified but may only provide temporary relief, as producers have already nominated a nickel for January.
The market got its first look at November supply/demand results from the American Chemistry Council (ACC), which showed that PE production was almost identical to October, as reactors again ran just shy of 85% capacity. PE exports were above 2 billion pounds for the seventh straight month, accounting for nearly 47% of total PE sales. Domestic sales slipped to 97% of the trailing 12-month average. When the dust settled, there was a moderate 2.5% inventory build, bringing producers’ collective stocks to the highest level since July, which helps to explain from where all of the December PE deals are coming.
Strong demand for PP resin
Spot PP trading was active and turnover was strong, making it one of the PlasticsExchange’s highest weekly tallies of 2023. The heavy buying came from processors that had de-stocked in anticipation of stellar December pricing that never materialized. Instead, upward cost pressures have kept PP prices elevated. In fact, spot prices rose another penny this week and are again nearing the interim highs of this rally, which were set a month ago. Producers had plenty of railcars to sell, however, and they were fairly liberal on prices in exchange for volume. Buyers who ran out of time to wait paid a pretty premium for prompt PP ready to ship.
December PP contracts headed for rollover
On the contract front, expectations of moderate relief from the past three months of PGP-led increases totaling $0.135/lb have fallen by the wayside, as monomer production struggles. December PP contracts are currently heading toward a rollover unless something comes to influence the market prior to completion of negotiations. Preliminary results released by the ACC showed that PP producers ran their reactors a little harder in November, at around 80%. Exports were a bit stronger, but at 6.6% of total sales, PP exports are not a massive influence on the market. Domestic processors were turned off by the steep cost-push price increase last month and slowed their purchases to only 96.5% of the trailing 12-month average. Total production outstripped the weak sales and, consequently, upstream inventories built for the second straight month back to levels not seen since April. For complete supply-demand data, readers are encouraged to subscribe to the ACC.
Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website.
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