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Robust exports, snug spot resin supplies, and potential storms on the horizon favor producers seeking price increases.

Posted by Staff

August 23, 2023

4 Min Read
colored plastic resins in test tubes
Hammad Khan/iStock via Getty Images

After a very strong start to the month, spot resin trading slowed a bit the week of Aug. 14 with completed volumes returning to more average levels. Prime polyethylene (PE) and polypropylene (PP) prices held steady after adding a penny a week earlier, reports the PlasticsExchange in its Market Update. Off-grade prices firmed further on a notable lack of offers.

While adequate, railcar sales would have been better had more well-priced material been available to meet specific orders. Packaged truckloads for immediate shipment were in high demand: Some were for normal monthly sales, some to tide over processors awaiting the arrival of railcars, and others serving as a buffer as the hurricane season heats up and a series of storms begin to brew in the Atlantic.

Record-setting resin exports

Strong buying interest from Latin America, Asia, and Europe continued to soak up excess resin, which diverts supplies away from the domestic market and has helped to maintain pricing levels, reports the PlasticsExchange. While exports have been robust, setting records in both June and July, most of it is being exported directly by producers and not through the traditional broker/export channels. This leads some to wonder if all of the export material is actually being consumed, or just stored in international warehouses for future sales. With spot supplies more snug, export demand still hot, and potential storms on the horizon, producers might leverage this little upward momentum to support their price increase initiatives, according to the PlasticsExchange. There is a nickel on the table for PE and a three-cent margin enhancer nominated for PP. Additional increases are expected to emerge for September.

Commodity-grade PE holds firm at two cents above market low

PE volumes scaled back from previous weeks, but the flow was still relatively good. After gaining a penny a week earlier, prices for all commodity-grade PE resins held firm two cents above the market low, which was established in July. Linear-low-density PE Injection and Film were the main movers at the PlasticsExchange trading desk for a second straight week, followed by low- and high-density PE resins. PE exports continue to thrive, as North American producers exploit their cost-advantaged natural gas liquid–derived feedstocks, while most of their international counterparts derive their resin from the more expensive crude oil/naphtha chain. There has been a concerted effort to ramp up PE exports these past few months, which is the primary reason much of the new capacity was built, and it’s very possible that before 2023 is over, more PE will be exported than sold into the domestic market in a given month, according to the PlasticsExchange.

Further adding to the tightening market was Chevron Phillips’ surprise force majeure announcement on Friday for all PE from its Orange, TX, facility following extended downtime due to a recent equipment failure. The force majeure might support producers in their effort to push through a proposed five-cent increase for August, which conveniently comes as storm systems develop on the Pacific, Atlantic, and Caribbean fronts of the United States.

Resin buyers take advantage of favorable PP pricing

PP trading outpaced the PE market last week for a change. Demand remained robust as buyers continued to restock inventories, recognizing value at these price levels. Prime co-polymer PP was the main mover, while a handful of transactions also took place in homo-polymer PP. After a sharp decline from March to June, the market stabilized through July and began to move up as August approached.

While spot Prime prices sit just two cents off their cycle low, off-grade pricing has recovered a nickel or more, which is particularly notable as monomer prices have actually softened. Pricing power has been slowly shifting back into the hands of sellers as supplies have tightened in the past four to five weeks. Instead of processors being inundated with offers and only purchasing as needed, more buyers have been initiating transactions and been willing to pay up to procure material, and in higher volumes, writes the PlasticsExchange.

While PP contract prices will continue to take their lead from polymer-grade propylene monomer costs, which should decline a penny or two in August, strength in the spot market has paved the way for producers to implement their $0.03/lb margin-enhancing increase. However, it is still uncertain whether or not the major indices will recognize the margin gains achieved this month or perhaps in September. It will ultimately be up to producers’ discipline to keep their reactor rates in check, and throttled back down into the mid-70%, to maintain this growing semblance of supply tightness, according to the PlasticsExchange.

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

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