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Resin Price Report: Week Marked by Sluggish Trading, Force Majeures

Spot resin activity has been uncharacteristically slow for a January; meanwhile, Ineos and Chevron Phillips wrangle with weather-related disruptions.

January 31, 2023

5 Min Read
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Resin buyers stayed stuck in the doldrums last week. Spot resin market activity was slower than a typical January, with completed volumes again below average. There was some rejuvenated demand, at least for polyethylene (PE), following severe weather and tornados in the greater Houston area. That affected some petrochemical complexes and led one producer to declare another force majeure on PE and polypropylene (PP).

Resin prices were flat to slightly higher at the PlasticsExchange, holding on to gains established earlier in the month, but not advancing further. Fresh resin offers were again thin last week: Very few prime PE and PP railcars have been made available to the domestic spot market this month, although several more groups of lower quality and transitional PE and PP railcars squeezed through, reports the PlasticsExchange in its Market Update. Most producers had already sold out of their spot export availability in early January. Chinese demand then waned ahead of the Lunar New Year, while stronger demand from Latin America picked up some of the slack. Robust export demand from China is expected to return in early February following the holiday.

Nickel increase for PE contracts could be a stretch

January resin contracts should settle soon. PE producers seem to be relaxing their stance with the softest splitting the increase to $0.05/lb in January and February. Despite a much more balanced supply/demand dynamic after at least four months of significantly reduced resin production, a nickel could still be a big stretch. However, adds the PlasticsExchange, there is a solid chance for implementation of a $0.03/lb increase. PP contracts will see a large cost-push price increase as it follows polymer-grade propylene (PGP) contracts a dime or so higher. Producers are also seeking a $0.03/lb margin increase this month, with another $0.06/lb now nominated for February.

Ineos declares force majeure on HDPE

Although PE activity improved — it was the strongest week of this young year — it still fell short of anything that could be considered overly exciting, reported the Chicago-based resin clearinghouse. Trading was well spread across high-density (HD), low-density (LD), and linear-low-density (LLD) PE grades, and in truckload volumes more than railcars. Most PE commodity grade prices were flat on the week, the lone exception being HDPE film, which gained another penny because of tighter supplies, which brought about better spot demand. HDPE has been in the spotlight for much of January, and even more so following Ineos’ force majeure on HDPE at its Battleground complex in Deer Park, TX, which suffered a direct hit from a tornado. The company had declared force majeure on HDPE in late December after winter storm Elliot.

PE producer inventories at lowest level since October 2021

Chevron Phillips is also still on a force majeure on PE out of its Cedar Bayou facility in Baytown, TX. These unexpected production disruptions, coupled with planned reactor rate cuts, have noticeably tightened availability, but processors are generally still well-supplied and do not seem overly concerned. Although most PE prices, both prime and off grade, held firm, only very limited volumes of Prime PE railcars have been available. Export demand is still strong, but fresh offers have been elusive so orders have already been lining up for February. Reduced production and record exports have drawn producers’ collective PE inventories to their lowest levels since October 2021. They are still pushing for some of their January price increase; if they don’t achieve it, well, they have already doubled down for February, writes the PlasticsExchange.

PP trading remained slower than anticipated, as processors continued to weigh their short to mid-term buying needs versus the strength and longevity of the PGP rally/producer margin increase efforts, which together could move January contracts up 10 cents or more. Spot PP prices rallied a solid $0.08/lb in the first part of the month and held flat this week as the PGP rally teetered. Of the relatively light volumes that traded, good Widespec homo-polymer PP transacted most; there was demand for Prime co-polymer PP, but processors resisted the relatively high prices, hoping to wait out the surge. Toward the end of the week, higher volume spot demand emerged, but it was mismatched against supply, though the dealings seemed likely to complete in the coming days.

The American Chemistry Council (ACC) issued a revision to its preliminary December data. (The PlasticsExchange encourages readers to subscribe to the ACC directly for specific figures.) After the revisions, the data now show that PP exports were even higher than initially reported. In fact, exports were at the second highest level of the last seven years, while domestic sales were even lower, the least since March 2013. Considering heavily curtailed production, producers’ collective PP inventories have dropped an additional 60 million pounds — more than 300 million below the September peak — and entered January at the lowest level in 16 months. After overproducing and squandering the wide margins earned on the back of a series of weather-related force majeures in 2021, incumbent PP producers have exhibited production discipline the past four months.

They have systematically reduced reactor rates from the 80% to the low 60% range as new capacity forces its way into the North American market. With inventories back in check and processor resin stocks diminishing, it will be interesting to see whether the resin rally will fade or if production margins can begin to rebuild, though that might require some better consumer demand, writes the PlasticsExchange.

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

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