Resin pricing report: Plastics processors replenish inventories

Commodity resin trading remained relatively swift the week of September 21, reports the PlasticsExchange in its Market Update. While there was some movement among grades, average pricing for both polyethylene (PE) and polypropylene (PP) was steady. A healthy flow of fresh offers, both domestic railcars and packaged truckloads, continued to hit the spot market. Processors, many of whom have been running their inventories down, were more willing to place orders. PE contracts dropped $0.04/lb in September, bringing the two-month relief to $0.09/lb. While PP processors will not reap the entire cost of PGP reduction, September contracts probably will see a small decrease with variance among participants.

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Spot PE trading continued to improve, according to PlasticsExchange analysts. Supply for commodity-grade resins was liquid and transactions were a bit easier to complete. The flow of wide-spec and downgraded prime railcars was strong and month-end discounts were generous. At the same time, buying activity has also strengthened as processors did some re-stocking at these lower levels. Still, margins compressed as suppliers competed for orders. September contracts are declining $0.04/lb, and while there are price increases of as much as $0.05/lb on the table for October, processors are also positioning as they seek another decrease.

The PP market is just sputtering along; supplies are still sporadic as is spot demand. We are seeing some consolidation as spot offers, particularly for wide-spec, have become discounted, shrinking the premium to cheaper priced contracts, reports the PlasticsExchange. However, spot prime material, when available, is still trading at an elevated level. As we have seen in the past several months, average September PP contracts will see a small decrease of $0.01 to 0.02/lb, while producers hang on to part of their $0.03/lb monomer cost savings. We anticipate little change in October monomer costs, so as producers push for additional margin expansion (averaging $0.05/lb), it is possible to see a net increase in PP contracts next month.

Read the full Market Update on the PlasticsExchange website.