Resin Price Report: Uptick in Demand for Commodity Resin

Although commodity resin trading maintained an above-average pace the week of Dec. 9, overall domestic sales for December will probably be relatively low industrywide, which is typical for this time of year, reports the PlasticsExchange in its Market Update. The weekly uptick in spot demand is probably a result of savvy buyers seeking to secure discounted holiday-priced deals as producers sell off surplus inventory lots.

First solid resin pricing increase since August

The flow of offers was reduced significantly this past week while demand remained comparatively good, translating to a very high ratio of realistic bids to completed deals at the PlasticsExchange trading desk. Most well-priced Prime railcars sold, and the market went into the Dec. 14 weekend with residual demand seeking material. Offers are expected to dwindle into the year-end, but nice buying opportunities will still be available. With selling pressure easing and buyers still out looking for resin, the PlasticsExchange marked up most of its polyethylene (PE) and polypropylene (PP) prices as much as $0.01/lb, the first meaningful increase for either commodity resin since mid-August.

Possible port strike in January rattles market

Houston-area warehouses are still jammed railcars full of resin awaiting packaging, so most warehouses have stopped accepting new incoming shipments. While resin is again loading onto container ships more quickly, the backups are severe, and the possibility is growing for another port strike to take place on Jan. 15. PE producers who have been running their reactors hard should be cautious, if not downright fearful, of this eventuality, as they have been relying on exports to consume as much as half of their total monthly sales. In the meantime, producers and traders alike are trying to ship as much resin as possible before the end of the year and prior to Jan. 15.

Related:Talent Talk: Reflections on a Horrible, No-good, Very Bad Year

PE trading continued to hum along: The spike in activity during Q4 was driven by producers’ efforts to chip away at material overhang by lowering prices, especially into the export market. While Prime has accounted for most of the exports, large volumes of off-grade material also were booked offshore, limiting availability in the domestic market. While there have been stellar one-off domestic railcar deals, too, the discounts have not been as extreme or widespread, reports the PlasticsExchange.

Spot PE pricing finds its footing 

Now that heavy selling has subsided, spot PE prices seem to have found their footing. Asking prices have generally popped $0.02 to 0.03/lb. Most commodity grades gained a half-cent, while low-density (LD) PE for film rose a full penny amid limited supply and particularly strong export demand. All PE film grades sold well, outshining the injection and blow molding business at the resin clearinghouse.

Preliminary supply/demand data for November released by the American Chemistry Council (ACC), revealed that PE producers increased reactor rates for a second straight month and made a record amount of resin. This was not the only record, as exports also soared to the highest level ever. For the first time, exports actually exceeded total domestic sales.

Domestic PE sales dropped for the fourth straight month: They were 5.6% below the trailing 12-month average, the lowest since last November. Upstream PE inventories rose again, as producers socked away more than one billion more pounds over the past four months to a new record of nearly eight billion pounds. Despite weak domestic sales and record inventories, producers are hoping to roll PE contracts flat again in December and have nominated January price increases ranging between $0.05 and 0.07/lb.

Prime PP prices inch higher

The PP market was a bit slower, though completed volumes were still respectable, according to the PlasticsExchange. Strong demand for packaged truckloads came from both processors and resellers, and exports to Mexico were also good. Prime PP prices at the PlasticsExchange rose as much as $0.01/lb as December polymer-grade propylene (PGP) firmed slightly and January monomer extended its premium to prompt, indicating a turn in the market and the likelihood of higher prices in the new year. Producers consequently seemed disinterested in booking more Prime railcars for December, although off grade continued to flow. December PP contracts are still expected to follow PGP lower for another small decrease and add to the $0.145/lb relief recorded in the previous three months.

Monomer prices firm up

Monomer prices have been firming up, and if this trend continues it is possible to close this month’s decrease gap, according to the PlasticsExchange, but either way it expects prices to rise in January and the first quarter. Preliminary data released by the ACC showed reduced PP reactor rates for the third straight month, again making 3% fewer pellets than the 12-month average. Domestic sales were also dismal for the third month in a row: They were the lowest of the year and more than 110 million pounds below the rest of the 2024 average. Processors continue to work through their resin stocks, which were built up in the previous five months, largely as a buffer against production disruptions during hurricane season.

The PlasticsExchange expects to see demand improve as the calendar turns to 2025. PP exports were a highlight, running about 7% of total sales, the most since August 2023. The increase in upstream inventories was negligible, entering December about 100 million pounds lower than January 2024 levels. For a more detailed look at production and sales data, readers are encouraged to subscribe to the ACC.

To read the full Market Update, including reports on monomer trading and the major energy markets, go to the PlasticsExchange website.