Resin Price Report: Prime Resin Availability Continues to Contract

Spot resin activity slowed down a bit last week, reports the PlasticsExchange in its Market Update.

Prime polyethylene (PE) was the more heavily traded resin and prices picked up another penny in the process, largely fueled by ongoing outages and sparse spot supplies. Polypropylene (PP) transactions were more limited but still tacked on another two cents amid some notable market developments, including a renewed surge in feedstock pricing buoyed by ongoing propane dehydrogenation (PDH) outages. Nonetheless, prime resin availability continued to contract with some allocations and force majeure conditions for both PE and PP intact.

Domestic resin demand the wild card

Exports to Latin America have been relatively strong so far this month and demand from Asia continued to ramp back up after the Lunar New Year. However, domestic resin demand continued to be the wild card. For the most part, it has remained disappointingly weak. Preliminary January resin data released by the American Chemistry Council (ACC) indicated that high- and low-density PE production levels snapped back substantially from dramatically reduced December levels. While domestic sales also markedly returned and exports stayed relatively strong, these two resin groups still posted somewhat small inventory builds. Linear-low-density PE data has not yet been released. Preliminary January PP data also showed much stronger production rates and an increase in domestic sales, while exports languished leading to a substantial inventory build. Some of these initial figures came as a surprise, and the PlasticsExchange expects some revisions to take place. For more specific data figures, the Chicago-based resin clearinghouse encourages readers to subscribe to the ACC directly.

High-density polyethylene in demand

PE trading continued to lag while spot supplies tightened further. Off-grade availability, again, was sporadic and suppliers did not openly offer prime railcars into the spot market, but they could be sourced for the asking. The bulk of transacted PE volume at the PlasticsExchange trading desk was for high-density material, as force majeure conditions endured, sending processors to the spot market to fill in their supply gaps. Numerous deals were struck in high-molecular-weight material for film, as well as high-density PE for blow molding and injection. Some low-density PE film grade business was sprinkled in, while interest in linear-low-density PE was scarce. January PE resin contracts settled up $0.03/lb, and February increases averaging $0.06/lb are on the table.

There seems to be a concerted effort to keep upward pressure on the market and try to implement another $0.03/lb hike this month, according to the PlasticsExchange. While resin availability is still limited, it feels that exports have dulled and resin production, while still throttled back from typical averages, might have been overdone in January. Since demand is still lackluster and market momentum has yet to follow through, advancing contract prices further in February could become a tall order unless there is a massive surge in demand.

Polypropylene resin prices rise two cents

In the PP market, there was a fairly heavy flow of off-grade homo-polymer and, to a lesser extent, good co-polymer railcars in the spot market. Prime cars were only available by ordering them. Limited volumes of prime packaged resin were available across the full slate of PP grades.

PP prices rose another two cents on the heels of a nearly five-cent gain in spot polymer-grade propylene (PGP). The fact that resin prices have not been able to keep pace with rising feedstock costs highlights both the lack of outright resin demand as well as disbelief that these higher price levels will be sustained, writes the PlasticsExchange. Indeed, spot PGP costs ran up past $0.50/lb during the first part of January amid PDH outages before settling back nearly a dime as the monomer supply outlook improved. PP producers ran their reactors much harder in January than they did in December, also pushing up monomer costs. Downstream resin demand could not support the extra volume, however, and all of the added costs could not be passed through, nor could all of the freshly produced resin be sold, resulting in sizable PP inventory in January.

Polypropylene producers seek $0.06/lb margin increase

PP contracts finalized last month at an $0.08/lb increase, which included an $0.11/lb cost-push increase partially offset by $0.03/lb of margin erosion. Spot PGP prices packed that dime right back on into the low $0.50s/lb during early February as PDH problems persisted. It will be interesting to see this month if producers will again chase the expensive monomer or ratchet reactor rates back to Q4 levels to offset the mismatch between January’s supply and demand, writes the PlasticsExchange. Producers are looking to regain the past two months of margin erosion with a $0.06/lb February margin increase in addition to the change in PGP contracts, which is already trending toward a $0.08 to 0.10/lb jump.

In order to re-establish meaningful margins, PP producers will need to regain the production discipline they had in late 2022 and also purge a chunk of their surplus inventories into the export market like they did in December.

Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website.