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Resin Price Report: Prices Inch Up Amid Strong Demand

Prime polyethylene added a half-cent last week, while polypropylene grades tacked on another two to three cents.


June 20, 2024

5 Min Read
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Irina Vodneva/iStock via Getty Images

It was another strong week for commodity resin trading, which came on the heels of the busiest week of the year at the PlasticsExchange trading desk, reports the resin clearinghouse in its Market Update. The spot market was very active the week of June 10, as material continued to change hands between sellers and buyers at a rapid rate while prices inched up.

Polyethylene (PE) trading took the volume lead: Domestic sales were dominated by low-density and linear-low-density PE film grades, while robust export demand drove transactions for high-density PE Blow Mold and Film. Polypropylene (PP) homo-polymer sales outstripped those for copolymer, which was again limited by a lack of readily available supply at favorable prices. Prime PE levels added a half-cent, while PP grades tacked on another two to three cents at the PlasticsExchange, mostly attributed to escalating polymer-grade propylene (PGP) monomer costs.

Shift in trade patterns benefits North American producers.

Lofty freight rates out of Asia are putting upward pricing pressure on a still-active export market, while ocean freight out of the United States is relatively cheap as shipping containers are needed in other regions. These issues have contributed to a shift in trade patterns that benefits North American resin producers. The first round of PE and PP export offers came and went quickly, with plenty of demand left unfilled.

PE trading activity remained heightened as spot demand stayed strong and Prime spot prices at the PlasticsExchange picked up a half-cent. The healthy flow of business was largely attributed to processors buying to cover their short- to mid-term needs with ready-to-go trucks. Some processors also sought to build extra inventory with railcar orders. Producers have been stingy with domestic supply, and Prime railcar offers reflected the June $0.03/lb price increase effort, which was met with plenty of processor resistance. Escalating freight rates from the Middle East and Asia continued to drive resin buyers from China, Latin America, and Europe to the US market for competitively priced resin. Ocean freight could escalate yet more as some sailings from Asia to the Americas have been canceled because of heavy risks amid the ongoing Red Sea shipping crisis.

PE reactor rates hit record levels.

A look at supply/demand data for May from the American Chemistry Council (ACC) showed that PE producers pushed reactor rates to their highest level of the year, making more than 5.4 billion pounds of PE. Export sales were off slightly and below 45% of total PE sales for the second consecutive month, but were still more than a million metric tons. Domestic PE sales were up in May and tallied 7% above the 12-month average. When the dust settled, there was still a sizable upstream inventory build to the highest levels since July 2022, according to the PlasticsExchange.

So, where is all of the resin? It seems large volumes are targeted for export, but have not yet shipped, while producers are also building an inventory buffer as the hurricane season gets underway.

PP contract prices poised to rise.

The PP market was very active as buyers sought spot material priced lower than contracts, which are now poised to rise in June on the heels of escalating monomer costs, reports the PlasticsExchange. The cost-push increase is currently tracking around $0.03/lb and could expand if PGP issues endure.

As we have seen for some months, high-quality, off-grade PP has generally sold in a heartbeat and at a premium, while less desirable wide-spec and transitional resin has languished, some even priced around spot monomer. The reseller community has relatively light PP stocks on hand and continued to scoop up railcars to back-fill orders and also procure packaged truckloads to tide over their customers. Thin supplies, solid demand, and rising costs equated to a $0.02/lb jump in Prime homo-polymer PP prices at the PlasticsExchange, while copolymer PP rose a hefty $0.03/lb last week. The substantial increase was primarily monomer-driven amid strong demand from PP producers and ongoing propane dehydrogenation (PDH) production issues. This aligns with the bullish undertone of the past few weeks, as trading has been extremely heavy with very little prompt material available.

“We have had an upward bias to monomer pricing ever since it bottomed out around $0.40/lb, believing PP producers would ramp up their operating rates with the cheaper monomer,” writes the PlasticsExchange in its Market Update. “Remember, PGP reached a high of $0.60/lb in early March. We also felt that PGP supplies were too snug and could spike higher if a production issue occurred. Therefore, we’ve been active buyers of PP for our market-making account and foresee additional upside ahead in pricing,” writes the resin clearinghouse. The upward trend has given some additional support to the producer push for a three-cent margin-enhancing increase this month, which would be the first this year, if successfully implemented.

According to the ACC, PP producers ran their reactors much harder in May, making 160 million pounds more resin than in April. Domestic demand in May was very good, too, as processors did some restocking on the two-month $0.12/lb price decrease. Exports also rose, driven by growing sales to Mexico. Even with the increase in production, total sales were enough to bring a second straight monthly drawdown in upstream PP inventories, which have dropped nearly 10% in two months. Subscribe directly to the ACC for more detailed supply/demand data.

Read the full Market Update for the week of June 10 on the PlasticsExchange website.

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