Resin Price Report: Spot Resin Trading Bounces Back as Railroad Strike Is Averted

The spot resin markets rebounded a bit the week of Aug. 19, with completed volumes at the PlasticsExchange evenly balanced between polyethylene (PE) and polypropylene (PP). Prime pricing was steady to higher, although there was some weakness in off-grade levels, reports the resin clearinghouse in its Market Update. While resin was more promptly available than a month ago, some grades stayed snug and commanded greater premiums.

Short-lived railroad strike

Added market interest arose late in the week as the Canadian rail labor dispute drew near and led to a worker lockout, bringing trains to a halt. The Canadian system was only shut down for a brief period before the government stepped in to order binding arbitration to end the labor dispute. Heading into the weekend, Canadian National, one of the two major railroads, suspended its lockout and its 6,000 unionized employees returned to work on Aug. 23. The other railroad, Canadian Pacific Kansas City, remained shut down, with a lockout of its 3,000 unionized employees still in effect at the time of writing. The work stoppage led one resin producer to declare a force majeure on all shipments to its Canadian locations. An ongoing shutdown would have created an economic and logistical nightmare for Canada and the United States, but ultimately the labor dispute will just result in added rail delays.

Low-density PE in short supply

PE trading had another good week, as a steady stream of buyer inquiries were met by ample offerings. Export business also snapped back, with good demand coming from Mexico and Latin America in general, and Europe to a lesser extent. While pricing for most commodity PE grades at the PlasticsExchange remained flat amid tight but adequate supplies, low-density PE resins remained outright scarce at 40-month upstream inventory lows, which pushed prices another penny higher. All PE grades are relatively snug, considering producers drew down more than 330 million pounds of inventory during June and July, according to data from the American Chemistry Council (ACC).

Favorable supply/demand fundamentals helped producers implement a 5-cent increase for July contracts. Another nickel is on the table for August, and new nominations ranging from five to seven cents have been issued for September. The added increases could come into play if the hurricane season ramps up, writes the PlasticsExchange. It was forecast to be an exceptionally strong year for hurricanes, but so far has been moderate. The dry air off the coast of Africa has been dissipating and meteorologists warn of potentially impactful months ahead, however.

Processors lift PP resin demand

Activity increased in the PP market, as processors have worked through some of their previous high-volume purchases and submitted a new round of orders. Better buying activity helped support current spot price levels, though further upside advances met with resistance as prices still hover at cycle highs. Producers’ PP inventories entered August about 200 million pounds below March levels, according to the ACC, but that could begin to improve as both Ineos and Invista bring back production lines, both of which still officially remain on force majeure. Formosa is expected to  commission new PP capacity before the end of the year, although this has been delayed several times.

Spot homo-polymer PP prices have risen $0.07/lb since bottoming out in the middle of May, while very tightly supplied copolymer PP resins have jumped $0.09/lb. PP contracts rose $0.07/lb during June and July, perfectly correlated with the rise in PGP monomer costs, both of which are poised to add another $0.02/lb in August.

Read the complete Market Update, including insights on ethylene and propylene pricing as well as trends in the energy markets, on the PlasticsExchange website.