Resin Price Report: Processors Push, in Vain, for More Spot Discounts

Following what was perhaps the busiest week of the year at the PlasticsExchange, resin trading slowed as processors pushed for another round of spot discounts. Producers, however, were less flexible on pricing, reports the PlasticsExchange in its Market Update, stopping dealmaking in its tracks.

Some good groups of polypropylene (PP) railcars were available, including copolymer PP high-flow, which had been scarce in the spot market. Though several producers said they were done selling spot for the month, a range of polyethylene (PE) railcars were shown at sharp levels. Packaged truckload sales remained relatively strong, as buyers required shipments to fill in for late railcars while others continued to buy limited volumes and only as needed.

There has been a relatively wide range of pricing in the market. While PE contracts held stubbornly firm in May, discounts for generic prime and off-grade resins grew. Some price consolidation may well be in the offing, according to the PlasticsExchange, as June PE contracts should finally confirm a $0.03/lb decrease, while deep spot discounts could disappear after the quarter-end inventory purge ceases. The PGP recovery rally has lost its momentum, and the PlasticsExchange said it expects to see a several cent decrease come through for June PP contracts. Export inquiries spilled in with aggressively low bids, citing competitive offers from Asia, but Houston availability already started to dry up ahead of forthcoming July offers.

PE trading pulls back

PE trading pulled back after a week of heavy turnover: Sporadic stop-and-go activity with an absence of follow through has been the dynamic of the first half of 2023. Although a significant hurricane threat to production has not yet materialized, plastics processors got a reminder of how delicate the Gulf Coast can be after three PE units shut down at CP Chem’s Pasadena facility in Texas because of a severe thunderstorm on June 21. Power was restored, but at the time of writing it was not clear whether or not the units had restarted. Though the impact of CP Chem’s shutdowns is still to be determined, it will likely be minimal and material remains widely available, said the PlasticsExchange. PE prices held steady at the resin clearinghouse the week of June 19 after mostly sliding a cent in early June, but spot resin had already given back all of its first-quarter gains and more by the end of May.

By contrast, PE contracts held firm, bucking the second quarter downturn; producers often manage to hold on to contract pricing a month or two longer than spot. June contracts remain under considerable downward pressure because of a combination of high domestic inventory, weak global demand, deep spot discounts, and low feedstock monomer costs. A $0.03/lb decrease in June will leave contracts up $0.03/lb for the year.

Demand for spot PP resin weakens

The surge in spot PP trading activity subsided. Demand was reduced as buyers seemed to have gotten their fill of railcars but continued to buy truckloads to smooth out supply gaps. Prices for homopolymer and copolymer PP held flat for the second week in a row. The little recovery in spot monomer costs helped shore up the low end of the pricing spectrum, while producers still opted to offer prime spot cars at monomer-plus levels, given cost volatility and uncertainty in upcoming June contract monomer prices.

Phillips 66 remains on a turnaround at its Bayway refinery in New Jersey, which has strained some PP supply. However, even with operational issues at Bayway and the decline in domestic stockpiles last month, availability remained quite good. The expected return of Heartland’s PP unit in Canada should bring more product back into the market.

PP contracts rose $0.26/lb in the first quarter and have already given back $0.19/lb in April and May. The PlasticsExchange anticipates that a few more cents will come off in June, a reflection of weak market conditions and low monomer costs.

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 May 2023, read this analysis by Zachary Moore from business intelligence firm ICIS.