Resin Price Report: Price Increases Wait in the Wings

After an up-and-down July in the spot resin markets, a new month brought renewed vigor to the market as the calendar flipped to August. Some interesting leftovers from July stimulated solid demand from both domestic and Mexican buyers, reports the PlasticsExchange in its Market Update for the week of July 29. In fact, the July offers looked a lot more attractive as fresh railcar pricing began several cents higher in the new month.

Another dime increase on table for PE producers

Prime polyethylene (PE) and polypropylene (PP) prices ran steady to as much as a penny higher, depending on grade, at the PlasticsExchange trading desk last week. Overall spot supplies remained fairly snug. Off-grade levels have continued to strengthen as PE producers held firm in July, hoping to implement at least the $0.03/lb price increase carried over from June. In addition to the outstanding June increase, PE producers have another $0.10/lb on the table, originally nominated as a nickel each for July and August.

Good off-grade PP railcar availability has been sporadic; homo-polymer PP has been easier to source than scarcely supplied copolymer PP, which continued to command a sizable premium. July PP contracts followed polymer-grade propylene (PGP) contracts up a nickel in July. While August initially trended several cents lower, monomer has strengthened to fully close that gap.

In the meantime, another storm system in the Caribbean has the market's attention, although the latest forecast suggests a path making landfall on Florida’s panhandle then moving up along the East Coast. Either way, this may impact truck and rail logistics, especially in Florida and the greater southeastern US coastline. 

Tightest supply of low-density PE for film in three years

PE trading exceeded the previous week's moderate pace. Domestic sales were fine, while export business into Mexico picked up considerably. Incremental exports into Latin America have taken a step back, as more competitive offers from China cooled buyers’ enthusiasm, but freight delays and long transit times from Asia still make US material quite attractive.

Prime PE pricing across the PlasticsExchange marketplace was steady to higher: High-density PE for film and injection rose a half-cent as producers shift away from lower margin grades, while low-density PE for film rose a full penny as the market contends with the tightest supplies in three years, reports the resin clearinghouse. Linear-low-density PE was a major mover at its trading desk, spread between film and injection grades, though prices stayed flat.

Feedstock prices soar

US Gulf PE producers are facing a rare margin squeeze, as a series of cracker issues have restricted ethylene supplies, sending feedstock prices to the highest level seen in more than two years. PE producers are tacking on at least a $0.03/lb increase to July contracts, and another dime is on the table that could come into play if more summer storms interrupt feedstock and resin production.

Little hope for PP price relief

After several robust weeks, the PP market limped toward the end of the month, as buyers sat back hoping to procure resin a bit cheaper in August. However, highly correlated PGP prices have been firming back up, dashing early hopes for price relief. This and ongoing railcar delays sent processors back to the spot market to secure material.

Homo-polymer PP sales took a back seat to copolymer PP — even off-grade resin has been commanding a premium price, said the PlasticsExchange. PP pricing has resisted declines as PGP monomer costs remain high, which will continue as long as propane dehydrogenation (PDH) production issues remain. In the meantime, copolymer supply tightened further heading into August following the recent force majeure declared by Ineos. It seems that lax PP demand from Mexico might have encouraged producers to throttle back reactors during the second half of July, as monomer softened while spot offerings remained scarce.

It will be interesting to see if the agility proves true and upstream inventories remain some 200 million pounds below interim peak March levels, muses the PlasticsExchange, adding that “it sure feels like it.” Even though PP prices have rallied since their spring low, given the scarcity in resin and monomer supplies and the most intense part of hurricane season still ahead, the PlasticsExchange recommends maintaining an ample resin inventory as a supply buffer. 

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.