Plastic resin trading was relatively active the week of Feb. 27 as the calendar turned to March. Good volumes of resin changed hands, and the transactions were well distributed among the major polyethylene (PE) and polypropylene (PP) commodity grades, reports the PlasticsExchange in its Market Update.
Domestic prime PE and PP railcars offers remained light and asking prices seemed high. Off grade continued to flow at attractive discounts, but it was still priced well above the cycle lows. Domestic demand felt a bit better, but fell short of historic standards at the PlasticsExchange trading desk.
Spot prime PE prices were mostly flat to a few cents higher supported by ongoing force majeure conditions. PP prices continued to climb, tacking on a couple more cents on the heels of still-soaring monomer costs. Continued challenges in polymer-grade propylene (PGP) production has limited critical monomer availability while PP producers ramp reactor rates back up in 2023 after reducing inventories sharply in Q4. The increased appetite for monomer has accelerated PGP gains amid the tight supplies. Good spot resin demand came from Mexican buyers, a welcome development as South American interest dampened and competitive offers from Asia grabbed some attention. Although resin production began to pick back up starting in January, suppliers have leveraged their steep inventory drawdowns to turn the tide in resin prices.
Processors are reluctant to embrace higher levels, but they are starting to forget about the down-and-dirty deals seen during the trough, writes the Chicago-based resin clearinghouse. PE contracts rose $0.03/lb in January, and while producers relaxed their February price initiatives to $0.03/lb, they will likely confirm flat. If so, another attempt will be made in March.
January PP contracts rose an average $0.08/lb, as PGP jumped $0.11/lb and most producers recognized $0.03/lb in offsetting margin compression. For February, PP producers had been seeking $0.06/lb in margin expansion on top of the $0.07/lb pass-through hike in PGP costs. While contracts have not fully settled, the general consensus is that there will be little change in margin, perhaps a penny or so either way. The PlasticsExchange expects PP producers to roll any outstanding margin increases into March. Demand for PE led to nearly robust trading, which kept upward pressure on the market. This resulted in flat yet firm pricing for some grades and a $0.01 to 0.03/lb rise for high-density (HD) PE, which has been tight since late December because of a series of force majeures from three major producers.
HD Blow Mold gained a penny, bringing year-to-date spot gains to $0.06/lb. High-molecular-weight PE added another 3 cents, and spot prices now are up $0.13/lb since the start of the year, reversing its position from discount to premium compared with most other PE grades, which have seen a $0.04/lb spot gain so far in 2023. Surprisingly, even with strong sales, HDPE was not the most-traded resin across the PlasticsExchange marketplace the week of Feb. 27. Linear-low-density (LLD) PE for Film and Injection changed hands the most and held steady in the process. The stable to higher pricing comes as Prime railcars were tight. The PlasticsExchange reminds processors, however, that Prime railcars can be secured with ample lead time; off-grade railcars are more amply available.
Though reseller inventories have been thinning out, packaged truckloads of all Prime commodity PE grades can still be found. Exports in February are expected to tally an impressive amount, as producer direct sales reportedly flourished, even though incremental sales through resellers fell short of expectations as Asian demand did not return with full vigor after the Lunar New Year. The PlasticsExchange expects overall producers’ offerings to remain restrained in the coming weeks, especially with February price increases pushed off until March.
Considering all of the excitement in the upstream propylene market, spot PP trading was surprisingly slow. No Prime railcars were offered, though they could be forecast into production at staggeringly high prices; off-grade railcars were intermittently available at a sizable discount to prime. There was only decent demand for co-polymer PP and to a lesser extent homo-polymer PP as the calendar turned to March, and ongoing tepid buying has created a significant lag in PP prices compared with PGP’s enormous rise so far in 2023. Spot PP prices rose $0.02/lb the week of Feb. 27, up a nickel for the month. While this year’s $0.13/lb gains seem like a large jump, they fall short of PGP’s contract increases, which totaled $0.18/lb through February, highlighting the compression in resin margins. Many processors are still determined to ride out the rally, which at the moment looks like it will endure at least into April or beyond.
Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website.