Spot resin activity picked up ahead of the Presidents Day holiday weekend in what was the busiest week of this young year at the PlasticsExchange trading desk. Although improved, demand was still somewhat slow and supplies were fairly tight, just as they were during the fourth quarter and particularly since January began, reports the Chicago-based resin clearinghouse in its Market Update.

Prime polyethylene (PE) remained the more heavily transacted resin compared with polypropylene (PP), which also saw more robust trading last week. After a healthy dose of business, spot resin prices were unchanged after picking up a penny or two so far this month. Some force majeures and product allocations are still in place amid ongoing production issues, while feedstock monomer costs remained elevated and maintained their upward pricing pressure. Demand from Asia has been slowly returning after the Lunar New Year, but has yet to approach the record levels seen in December.

Surprising PE, PP production data

Additional preliminary January resin data released by the American Chemistry Council (ACC) last week showed that production and inventory levels for both PE and PP bounced back strongly, alongside improved domestic sales and still-solid exports. Some of these initial figures were a bit of a surprise, and we might see some revisions, commented the PlasticsExchange, but production for both PE and PP recovered more than sales and led to inventory builds for both resin groups. For a more in-depth look, subscribe to the ACC for specific data figures.

Improved spot demand for PE

PE trading gained strength last week, as spot demand improved. Prices did not advance further, but held on to the $0.01/lb gain garnered earlier this month. Some of the more enthusiastic buying could be attributed to late railcars requiring immediate resin availability, while other processors just procured material in their normal course of business. Transactions were well spread across all PE commodity grades with low-density PE taking the lead as the major mover of the week, barely edging out volumes for high-density PE Injection and Blow Mold grades, while linear-low-density PE trading again brought up the rear. CP Chem and Ineos still have force majeures in place, largely affecting high-density PE resins. Spot PE supplies in the reseller community thinned out creating some sourcing challenges, but all commodity grades could be found if one was willing to pay several cents higher, according to the PlasticsExchange.

After securing a $0.03/lb increase for January contracts, producers are still intent on implementing another price hike in February. An average $0.06/lb increase is on the table, but producers really seem to be targeting another three cents, according to the PlasticsExchange.

Price increase expected for PP contracts

The PP market was a bit busier, but deal-making was not necessarily easy — it was often difficult to find the well-priced grades that processors sought, while still hard to sell currently available lots to other buyers. Homo- and co-polymer PP prices finished the week flat. They stayed up by two cents for the month, and up a solid dime since the start of 2023. Even though there will be another sizable cost-push price increase implemented for February PP contracts, neither spot demand nor pricing have kept pace, so some compression is being seen in spot margins. Although PP producers ramped production back up in January, Prime railcar offers have been restrained all month. However, similar to PE, Prime railcars can be forecasted into production with some lead time required. Meanwhile, limited Prime quantities of all commodity PP grades have been available in packaged truckloads, and there has been a healthy flow of off-grade railcars pelting the market.

PP producers continue to buy spot monomer to run reactors relatively hard compared with Q4, and this has kept upward pressure on spot polymer-grade propylene (PGP) prices this month. It seems a tad strange to run hard and perhaps add to upstream inventories made with expensive feedstock as they did in January, while also seeking to regain the past two months of margin erosion with a $0.06/lb February margin increase in addition to the change in PGP contracts, which is still on track for a $0.08 to 0.09/lb jump, mused the PlasticsExchange in its weekly report. “We imagine that downstream resin and finished goods inventories are dwindling, but processors still complain of slow consumer demand, and they seem to be holding out on their resin restocking orders until this cost-push rally subsides. Time will tell which side blinks first,” said the PlasticsExchange.

Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website.