Resin Price Report: Prime PE, PP Prices Pop Up a Penny

The spot resin market began the week of July 8 with a flurry of transactions through Wednesday, business then slowed a tad, but another little surge hit just before the weekend, reports the PlasticsExchange in its Market Update.

Prime polyethylene (PE) and polypropylene (PP) prices popped up a penny or more early on and mostly held that level through the week. A trickle of off-grade railcars rolled into the spot market. Prime railcars, however, were restricted, as producers evaluated conditions in the wake of Hurricane Beryl.

The storm took a surprise turn north and made landfall in the Houston area on July 8, thrashing the region with winds that approached 100 mph while dumping a foot of rain. Widespread flooding complicated recovery efforts and will leave lingering logistics headaches and delays, writes the PlasticsExchange. By the end of last week, close to a million people were still without power.

Resin producers hunker down ahead of Beryl.

Several PE and PP producers in the storm’s path, including Ineos, Formosa, LyondellBasell, Baystar, and Dow, executed precautionary shutdowns or adverse weather preparation plans. Ultimately, few major problems were reported and most facilities have restarted operations. However, the Enterprise PDH (propane dehydrogenation) #1 Unit reportedly has meaningful issues. Despite reduced demand for ethylene and polymer-grade propylene (PGP) monomers last week due to resin production disruptions, the spot monomer markets held up well and even moved higher in price. The Port of Houston was also closed for two days and several warehouses faced power outages and were closed through Tuesday. If resin reactors can get back up to speed without further issues, the primary impact of this season’s first Gulf hurricane will be about a week or so of lost production, as well as an elevated disaster premium and awareness as the hurricane season is just getting underway, said the PlasticsExchange.

Limited PE resin supply.

PE trading was limited by the lack of fresh supply, asproducers generally withheld their material from the spot market pending post-hurricane restarts and an evaluation of overall market conditions. A few prime railcars were made available from reseller-forecasted commitments later in the week, which sold fairly quickly. The first round of July export offers sold out immediately. Significant export demand remains, although the PlasticsExchange said it started to see some pushback on prices resurface. Rising freight rates from Asia to Latin America hit pause and showed some signs of softening, but they remain right up against their highs of this cycle.

Producers ultimately rolled their $0.03/lb price increase from June into July, which already has its own $0.05/lb increase on the table. The month is still young, but Beryl might prove to be the catalyst to help producers secure a price increase in July, according to the PlasticsExchange. In addition, a fresh nickel has already been issued for August. In total, there are currently $0.13/lb of increases floating around.

Preemptive shutdowns.

Baystar restarted two of its three lines at its Bayport polyethylene reactor, but was dealing with rail service delays. Dow Chemical’s three plants, which were heard to have preemptively shut down, were also being assessed in all likelihood for damage in preparation of restarting operations, although the company did not provide any details publicly. LyondellBasell’s Matagorda, TX, high-density (HD) PE plant is assumed to have shut down, but the company has not released any details concerning its present situation. Ineos had taken precautionary measures shutting down its PE and PP reactors ahead of the storm. During the past week, the company continued efforts to evaluate impacts to its reactors and logistics infrastructure prior to restarting operations.

ACC releases preliminary June data.

Preliminary June data released by the American Chemistry Council (ACC) showed a reduction in monthly PE production of more than 250 million pounds compared with May, but that is still 1% above the trailing 12-month average. Domestic PE sales were strong, nearly 3.5% above the 12-month average, while PE export sales jumped about 150 million pounds from May and represented almost 47% of total PE sales.

Low-density (LD) PE exports soared to more than 50% of total LDPE sales amid robust Chinese demand, leaving the second-lowest upstream LD PE inventory since August 2021. Linear-low-density (LLD) PE inventories were also drawn down sharply to the lowest level since August. These materials are quite tight in the spot market, comments the PlasticsExchange. High-density (HD) PE went the other way and inventories built for the second month in a row: Injection grades are plentiful, indicative of new reactor starts, though HDPE for blow molding and film remain relatively scarce.

Prime PP $0.07/lb higher than at cycle’s low point in early May.

The spot PP market also took pause to assess conditions after Hurricane Beryl barreled through the Gulf, which temporarily shut down some production capacity. Prime PP at the PlasticsExchange trading desk rose a solid cent and now sits about $0.07/lb higher than the cycle’s low in early May. Formosa Plastics issued a press release essentially stating that no severe damage occurred at its facilities and that it was working to restore normal operations by Friday.

While some sporadic widespec railcars flowed into the spot market, which sold at rising prices, all the Prime homo- and copolymer PP that transacted across the PlasticsExchange platform last week came from trader-owned supplies. There were some Prime railcars offered from reseller forecasts, but they were priced on a PGP-monomer-plus basis. With spot PGP on a serious upswing, spot buyers reportedly felt it excessively risky to take a bite.

PP contracts poised to rise more than a nickel.

July PP contracts are currently pointing to a nickel or more increase based on rising PGP monomer costs, while producers are also seeking an extra $0.03/lb increase to expand their margins. Preliminary June data from the ACC showed that resin reactors ran harder, and above 85% of capacity for only the second time in two full years. Producers leveraged strong export demand to support the added production, which also put upward pressure on the PGP monomer market. PP exports were the highest since August 2023 and domestic sales flourished, too, reaching 4% above the trailing 12-month average.  

In the end, almost all of the added production had found a home, leaving negligible upstream inventory of less than 10 million pounds. Readers are encouraged to subscribe directly to the ACC for detailed production and sales data.

To read the full Market Update, go to the PlasticsExchange website.