Resin Price Report: Tight Inventories Push Prices Higher

Polyethylene (PE) and  polypropylene (PP) resin prices continued to climb the week of Aug. 12, reports the PlasticsExchange in its Market Update. Inventories for these commodity resin groups are tight and the squeeze could tighten even more as feedstock costs spiral higher, which could limit fresh production.

Many processors are still working through substantial purchases made during the past couple of months, but the PlasticsExchange said it also received a steady flow of orders from customers procuring their normal supplies. There were urgent  truckload needs from resellers, as their customers required quick resin because of late railcar shipments, and export demand also picked up a little, albeit challenged by competitive Asian and Saudi offers, said the resin clearinghouse.

Strikes could sever supply chains

A rail strike in Canada and a possible longshoremen strike at US Gulf and East Coast ports could be very problematic for supply chains. At the time of writing, however, it appears the Canadian railway strike could be short lived as a result of binding arbitration ordered by the government.

PE trading had a fairly good week in terms of activity and completed deals, according to the PlasticsExchange. Supplies remained constrained, a consequence of lost production because of Hurricane Beryl but also because of operating rate cuts in response to soft export demand and rapidly rising monomer costs. Low-density (LD) PE was the major mover at the PlasticsExchange trading desk last week, as upstream LDPE supplies dropped to their lowest level in 40 months, sending buyers to the spot market in search of material.

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Spot PE prices inch up

Spot PE prices were steady to higher, as high-density (HD) film and blow mold and linear-low-density film each rose a half-cent. HD injection jumped a full penny, a result of tightened supply as some producers facing a margin squeeze shift their product slate toward more premium grades.

Preliminary data recently released by the American Chemistry Council (ACC) showed resin reactor rates dropped significantly during July, producing some 250 million fewer pounds of PE than in June, and 500 million fewer pounds than in May. PE exports also dropped a similar volume from June levels, while domestic sales flourished: They were above the 12-month average amid strong processor throughput and downstream inventory replenishment. 

All told, collective upstream PE inventories declined sharply, bringing the two-month drawdown to more than 330 million pounds. PE supplies are at their lowest level since March 2023, and the lack of material has been impactful, writes the PlasticsExchange, which encourages readers to subscribe directly to the ACC for more detailed production and sales data.

Another nickel increase for PE?

PE producers deserve credit for reacting to a more-challenging export environment by reducing production rather than continuing to run hard and inadvertently building burdensome inventories during July, writes the PlasticsExchange. This discipline helped producers implement a full nickel increase on July domestic PE contracts by disengaging the stronger domestic market from weakening export pricing, which had been highly correlated for months. While there is another nickel on the table for August, which keeps some upward pressure on pricing, the domestic market needs to fully digest the July increase before potentially advancing further, opines the PlasticsExchange.

Although Hurricane Ernesto avoided the petrochemical-producing Gulf, the risk of summer storms remains high as we enter the peak of hurricane season. At least one producer has nominated a fresh $0.07/lb increase for September contracts, just in case.

PGP monomer costs plague PP prices

PP trading lost a bit of luster as spot levels chugged a cent higher, driven primarily by another run up in polymer-grade propylene (PGP) monomer costs. Ineos kept alive its force majeure on copolymer PP (CoPP), although production recently restarted. Invista still has some lines down, which are expected to return online soon, and Formosa is expected to finally bring on new capacity before the end of the year. In the meantime, CoPP supplies remained snug throughout the supply chain, especially high-flow, while homo-polymer PP (HoPP) was readily available. This ongoing trend has pushed CoPP resins to a wide $0.07/lb premium over HoPP in the spot market. 

Completed PP business across the PlasticsExchange marketplace was limited, as processors worked off healthy on-hand resin stocks, which they replenished over the past four months. In fact, domestic sales during the past four months averaged approximately 100 million pounds more on a monthly basis than in the previous four-month period.

August PP contracts, which rose $0.07/lb between June and July, are poised to take a cost-push increase for the third straight month. The PlasticsExchange reminds readers that it has been bullish on PP pricing, and bought resin aggressively during May and June. Since then, it has been lightening its positions as prices rise, although it remains somewhat bulked up in case the hurricane season intensifies.

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