Resin Price Report: Weak Demand, Lower Prices

The resin markets maintained their slower pace leading into the extended Thanksgiving holiday week. The steady flow of buyer inquiries seen earlier in the month subsided, and most grades of Prime polyethylene (PE) peeled off as much as a penny, as did polypropylene (PP), which was helped by easing PGP monomer costs, reports the PlasticsExchange in its Market Update.

Exports account for almost half of all PE sales

Upward momentum has fizzled and market sentiment has soured as resin availability improved, particularly in the PE market after a pair of force majeure incidents had been lifted during the week. A handful of PE producers lowered their export prices to maintain their competitive pricing on the international stage, which is critical as exports now comprise nearly 50% of total PE sales.

The PlasticsExchange reports seeing some discounted PE and PP spot railcars in the domestic market, too. That will make it very difficult for PE producers to implement the three-cent increase on the table for November. They should be thankful if they are able to hold contracts flat, according to the PlasticsExchange. PP contracts are still on track to see a cost-push increase from the early month spike in the polymer-grade propylene (PGP) market, though the magnitude has lessened as the spot monomer rally has since fizzled.

Low-density PE Film biggest mover in spot resin market

PE saw relatively good activity, though most of it came from sellers as prices pulled lower. Low-density (LD) PE Film was the most actively traded resin across the spot platform at the PlasticsExchange, followed by high-density (HD) PE Blow Molding and Injection grades, but completed volumes were underwhelming and tallied below average.

Resin availability improved: Nova and CP Chem officially lifted the force majeures at their respective plants in Sarnia, Ontario, and Orange, TX, and several nice groups of Prime railcars rolled into the spot market, but high-volume buyers were elusive.

Other PE grades saw limited interest, which factored into the overall decline in pricing — as much as a full cent. Producers aggressively priced their resin for certified export; by the end of the week, some claimed to be sold out for the month. While price increases are nominated for November and December domestic contracts, given softening spot conditions and enhanced resin availability, further increases in 2023 are unlikely unless something changes, according to the PlasticsExchange.

Weak demand for PP

The PP market was slow, continuing the weak demand trend seen so far this month. To the extent possible, processors have been limiting their purchases as they seek to avoid peak pricing during this cost-push price rally. PP producers, sensing the lower demand, have likely cut operating rates further this month, which has put PGP supply back into the spot market. The Enterprise propane dehydrogenation (PDH) #2 unit is also expected to return to production.

As such, spot monomer prices seem to have topped out around $0.50/lb and have already started to retreat. PP contracts rose $0.085/lb during September and October. There should still be a mild increase this month fed by the initial cost spike, but this will now limit implementation of the pending increase.

Spot resin availability has not really swelled, but the lack of demand has been noticeable and the market reacted by dropping a penny this week, leaving Prime PP prices up $0.07/lb from the July low. Upstream PP inventories are already considered tight, so any further production reductions could leave the resin market vulnerable, especially with PDH and refinery turnarounds planned in the first quarter.

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