July 27, 2023
Activity in the commodity resin markets was muted but still healthy the week of July 17, according to the PlasticsExchange. The flow of fresh offers slowed a bit, as did demand, and truckload transactions outstripped railcar sales.
Prime polyethylene (PE) prices were steady to a penny lower, depending on grade, reports the PlasticsExchange in its Market Update. Prime polypropylene (PP) prices didn’t move, and they have been amazingly flat for the better part of two months, quite the change from the super volatile first part of the year, writes the resin clearinghouse. Some PE and PP producers have maintained an aggressive selling stance for several weeks now, while others have become more passive with their offers, limiting spot availability as supplies tighten amid reduced production and heavy exports. International buying was still strong last week, with the most interest coming from Latin America and Asia.
More North American PE capacity on tap
Additional PE capacity from Baystar’s new unit is expected to come online by the end of the month, producing 625,000 metric tons per year and providing downward pressure on the market. As an offset, rising Crude Oil costs are supporting international resin prices, creating more demand for cost-advantaged North American PE, which is largely derived from the cheaper natural gas liquids (NGL) stream. As more propane dehydrogenation (PDH) units are built in the United States — the fourth is starting up now — some PP production, including in Canada, is becoming cost advantaged, and related PP exports will grow, too.
LLDPE Film grade supply tightens
PE trading remained strong and carried the majority of completed volume during the week at the PlasticsExchange desk. High-density (HD) PE Blow Mold and linear-low-density (LLD) PE Injection and Film were the major movers across its marketplace, while business for low-density (LD) PE Film was limited. Supplies of LLDPE Film grades have noticeably tightened, leaving unfilled orders for low-priced buyers. Pricing for LLDPE held steady whereas the rest of the PE grades slid another cent as some producers, but not all, continue to unload material into the export and domestic spot markets.
The overall discount in spot levels is becoming further detached from contract levels, with large buyers able to negotiate non-market movements leading up to July contract settlements, writes the PlasticsExchange. Producers have three-cent increases on the table for July, but this is seen as more of a precautionary move in case major production disruptions develop as we head deeper into hurricane season. It is very possible that the indices will print flat prices again for contracts in July, but it might make more sense for them to give up $0.03/lb to bring their pricing and related contracts more in line with actual market conditions and spot pricing, according to the PlasticsExchange.
Spot PP trading volume falls short
Spot PP trading had another light week, as completed volumes fell short and demand was focused on co-polymer PP, which remains significantly tighter than more plentiful homo-polymer PP. Prime PP prices held steady last week at the PlasticsExchange trading desk, as they have all month, and it seems that contracts will roll flat for July, too. There has been price movement for off-grade resins, however. Some poor quality material has transacted around the cost of monomer, but the low end of the market has lifted a bit as production remains restrained and supplies tighten.
Some market participants, including the PlasticsExchange, believe that PP prices are a deal at these levels and have been replenishing their inventories. Rising Asian monomer costs have also pushed their regional PP prices higher, aiding exports, particularly for the aforementioned lower end resins, supporting US prices. Meanwhile, Lyondellbasell and Total have joined Braskem in support of a $0.03/lb increase for August, on top of any change in the polymer-grade propylene (PGP) contracts. Much like in PE, these proposed increases are primarily seen as a precautionary measure during the hurricane season, which has been uneventful so far this year. PP has not seen a margin increase since March; if producers continue to keep PP production under control and exports continue to grow, however, pricing power could start tilting back into the hands of sellers.
Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website. For a recap of resin pricing and activity in June 2023, read this analysis by Zachary Moore from business intelligence firm ICIS.
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