Resin Price Report: Spot Prime PE Prices Continue to Slide

What goes up must come down, and so it goes in the resin market. After a busy period of spot resin trading activity in October and into November, transactions dropped precipitously the week of Nov. 11, reports the PlasticsExchange in its Market Update. Trading did pick back up toward the end of the week, and railcar sales exceeded truckloads, but completed volumes remained below average. The resin clearinghouse anticipates a busier trading week ahead of the Thanksgiving break.

Resin stockpiled in Houston warehouses

Spot polyethylene (PE) and polypropylene (PP) prices held steady, and while a handful of domestic discounts attracted buyer interest, producers seemed less eager to move material, according to the PlasticsExchange. By contrast, export interest remained robust. Most of the early November export offers were quickly cleared and there is still unfilled demand at price levels seeking competitive supply. There is a tremendous amount of resin sitting in Houston area warehouses awaiting export shipment, but ships to most regions have been full and many cargoes have been rolled to future sailings. Meanwhile, the congestion has caused a slowdown in packaging as bottlenecks arise.

Producers rally to keep domestic market afloat

PE trading was well-distributed throughout all major commodity grades, but the week’s total tally fell short of typical volumes. Pricing for all commodity PE resins held flat, though overall market sentiment remained negative. The PlasticsExchange notes that there have been several other weeks of stability during this down leg of the current cycle, which began in July. Spot prime prices have fallen $0.05 to 0.07/lb during the break and the market is still searching for a bottom. Producers provided a $0.03/lb contract price decrease in October and are trying to keep the domestic market from sliding further before the end of the year.

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Preliminary supply/demand data for October released by the American Chemistry Council (ACC) showed that PE producers increased reactor rates, making 166 million more pounds than in September, though nearly 150 million fewer pounds than in August. Domestic PE sales were right at their trailing 12-month average, and PE exports were about 99% of their average, while comprising a solid 46% of total sales.  

Even though total October PE sales were up 2.3% over September, a third straight upstream inventory build reached a new record, which helps to explain why Houston area warehouses are packed to the gills, though much of it is committed for future sales awaiting shipment.

Another force majeure lifted

Spot PP trading dominated completed business at the PlasticsExchange during the week. Homo-polymer PP outstripped copolymer PP sales, though total volumes were still not overly exciting. Demand for packaged truckloads remained steady as a result of slow railcars in transit and packaging delays. The relentless slide in prime homo-polymer and copolymer PP prices paused after dropping about $0.11/lb since peaking at the end of August. Availability improved as Invista lifted its force majeure on PP products, coming just one week after Ineos called off its force majeure on copolymer PP. According to ACC data, PP run rates were down a bit in October, and producers made 5% less PP compared to the trailing 12-month average. After five months of strong sales, domestic demand was below average for the second straight month.

There was an uptick in exports, which reached 5% of total PP sales, and that helped generate a small drawdown in upstream inventories, which are still considered healthy. For a more detailed look at production and sales data, readers are encouraged to subscribe to the ACC.

Third straight price drop for PP contracts

Despite the stable PP market and the decline in October stockpiles and run rates, November PP contracts will take a third straight price decrease correlated to falling polymer-grade propylene (PGP) monomer costs. The PlasticsExchange currently anticipates a drop of around $0.03 to 0.04/lb, adding to the 10-cent decline seen in the previous two months. The forward PGP market is priced above current levels, so it expects to see a higher trending market come January.

Read the full Market Update on the PlasticsExchange website.