Resin Price Report: Resin Market Abides as Storm and Port Strikes Loom

At the time of writing, all eyes are on Hurricane Helene, which is forecast to grow into one of the largest storms in the Gulf of Mexico in the last century, according to reporting from CNN. It is currently tracking north toward the Florida panhandle. Companies have shut nearly 30% of US oil production in the Gulf of Mexico because of Helene, reports ICIS. While operations at refineries and petrochemical plants in Texas and Louisiana will not be threatened directly by Helene, which could strengthen into a Category 4 hurricane by the time it reaches northwestern Florida, the potential path of destruction will affect transportation and infrastructure. Most tragically, lives are at risk: The National Weather Service is warning of an “unsurvivable” storm surge in Florida’s Apalachee Bay.

Strike could shut down ports

Earlier this month, Hurricane Francine caused a brief slowdown in resin production as companies took precautionary measures, but Louisiana resin production has since returned to normal levels, reports the PlasticsExchange in its Market Update. A man-made disruption also may be on the horizon, however, as East Coast and Gulf Coast port workers approach the Oct. 1 deadline for labor negotiations. If an agreement is not reached, a strike could be called that would shut down several ports, including Houston, the primary export hub for US polyethylene (PE) and, to a lesser extent, polypropylene (PP).

Related:Resin Price Report: Force Majeures on Copolymer PP Stifle Supply

While all of that was simmering, the spot resin market saw a healthy recovery at the PlasticsExchange trading desk, as completed volumes climbed above average while pricing took a flat to lower path the week of Sept. 16. Competitively priced material sparked domestic interest and also spurred demand from Mexican buyers. Offers were more plentiful and wider discounts were afforded for off-grade materials, while Prime PE prices managed steady, but with a weak undertone, reports the PlasticsExchange. Prime and homo-polymer and copolymer PP levels dropped another penny as monomer costs eased further.

High volume of PE changes hands

PE trading picked up considerably during the week and the PlasticsExchange reports that a relatively high volume of material changed hands across its spot platform. Discounted off-grade railcars dominated activity, and linear-low-density PE for film was, by far, the preferred resin of choice. Truckload business was much more limited, although there were some urgent last-minute needs for packaged resin that the PlasticsExchange fulfilled from its market-making inventories.

Export requests remained relatively strong, but overseas buyers seem to have taken either a wait-and-see approach or opted for cheaper Asian and Middle East resin. All PE commodity grades were flat on the week, bucking producers’ intent to implement a nickel price increase for September contracts. To the contrary, challenging export conditions have led to bulging upstream resin stocks and backups at packaging warehouses, which has shifted implementation of the current domestic nickel nomination from still possible to unlikely.

Brazil raises resin tariffs

Adding to challenges for resin producers, Brazil this week announced additional tariffs on petrochemical imports including PE, raising rates from 12% to 20%. While the objective is to raise local prices in support of Braskem in Brazil, this move will also impact US producers and exporters, the largest PE suppliers to Brazil, with lower netbacks.

Slight drop in spot PP prices

Prices dropped slightly in the spot PP market as sellers, sensing lower prices ahead, tried to keep material moving and lighten their inventory. More ready-to-go truck deals were completed for PP than PE, but there was still a good showing for completed PP railcar business, according to the PlasticsExchange. While plenty of processors are well-stocked with resin, having beefed up their supply buffer during the hurricane season, others welcomed the softer prices and picked away with purchase orders.

Prime pricing for homo- and copolymer PP dropped a penny, extending the monthly decline to $0.04/lb. Lower prices came alongside a continued decline in feedstock polymer-grade propylene (PGP) monomer costs, as all propane dehydrogenation (PDH) units were up and running. The drop in pricing came as production improved, as well, although Ineos and Invista have not given updates on their force majeure declarations as they rebuild their stocks.

Price relief ahead

PP contracts took $0.09/lb of cost-push price increases during the June to August period, but the PGP rally has been unwinding, leading the PlasticsExchange to anticipate a $0.04 to 0.05/lb price decrease coming through for September contracts. There could be additional relief for October, as well.

Read the full Market Update on the PlasticsExchange website.