Resin Price Report: Trading Pace Eases as Lazy Days of Summer Roll In

The unseasonal strong demand in spot resin markets that marked the first part of this month stepped back the week of July 15, reports the PlasticsExchange in its Market Update. The spot resin markets began and ended the week slowly but managed to confirm significant volumes along the way. The trading pace has eased, as production and logistics returned toward normal following Hurricane Beryl.

Series of notable events creates sense of unease.

It was a tense trading week, which brought sporadic spurts of activity and solid volumes, but also periods of quiet as participants evaluated a series of noteworthy events, according to the PlasticsExchange. Those events included the assassination attempt of former President Donald Trump, heightened tensions in the Middle East, volatile monomer markets, sliding international ocean freight rates, lack of fresh resin supply in the aftermath of Beryl, and worldwide tech outages that grounded more than 3,000 flights, closed the port of Houston for a brief period, and created an overall sense of vulnerability and unease.

Spot PE, PP prices pull back $0.01/lb.

Market sentiment turned cautious, notes the PlasticsExchange. Resellers were eager to keep resin moving, and spot polyethylene (PE) and polypropylene (PP) prices pulled back an average of $0.01/lb. PE trading hummed along, with domestic business at the PlasticsExchange trading desk regaining dominance over offshore sales. Low-density PE for film remains snug and linear-low-density PE 20 melt granular is virtually non-existent. Exporters competed for high-density PE Blow Molding in an auction that garnered a higher price than expected. Other spot export asking prices from the United States continued to rise and offers were very limited.

Cheap Chinese resin gets attention.

International resin buyers took a step back from chasing US material, as a cheaper set of Chinese offers made its way into Latin America, supported by softer, though still greatly elevated, ocean freight rates. There is mounting concern that China, which is burdened with overcapacity in plastics production, will start dumping resin on the world market. While shipping delays and long transit times from Asia persist, Latin American buyers were emboldened. It will be interesting to see if North American PE producers react quickly to maintain their high levels of exports, writes the PlasticsExchange. Otherwise, it adds, if operating rates remain robust, inventories can build fast.

Producers remain firm on implementing at least a $0.03/lb domestic contract increase that carried over from June. It seems likely to take hold this month, but it will take something special to realize the next $0.10/lb, as there is a nickel on the table for July and August.

Robust domestic demand for PE resin.

Domestic PE demand has been particularly good for the past four months, as sales have averaged 4.7% above the trailing 12 months. PlasticsExchange customers have not only increased their order flow and volumes, said the resin clearinghouse, but also comment about better throughput and their own increased customer sales. Some of the extra buying has also served to replenish downstream resin stocks after a long period of destocking, which seemed to last up to Q4 of 2023. The 2024 hurricane season has been widely forecasted to be extreme and it made sense for market participants to build an inventory buffer as a hedge against production disruptions and potentially escalating prices.

PP transactions tepid.

PP activity transacted at a more tepid rate with the bulk of transactions at the PlasticsExchange completed in the middle of the week. Overall availability has been light all month, good copolymer (Co) PP railcars continued to sell in a flash while traders and processors pecked away at Prime homo-polymer (Ho) PP truckloads, as needed. Spot HoPP and CoPP pricing peeled off a penny, as the ferocity of demand dropped off, relieving a little of the premium for prompt material. Some export PP cars emerged for late July production at prices about a nickel higher than they were a month ago. They were not particularly well received, noted the PlasticsExchange.

This contributed to a minor sell-off in propylene this week, as incremental PP exports have supported polymer-grade propylene (PGP) prices, and someone seemingly chose to liquidate some monomer rather than turn it into pellets.  

The PGP selloff was quick and prices firmed right back up by the end of the week, as monomer supplies remain tight. In the meantime, July PP contracts are leaning toward a moderate single-digit increase. The PlasticsExchange said it maintains its estimate for a clean cost-push nickel hike reflecting higher PGP levels during the month. Producers have been seeking an extra $0.03/lb increase to expand margins, but a net $0.08/lb hike in July seems like a bit of a reach.

To read the full Market Update, go to the PlasticsExchange website.