Easing resin prices and a rise in activity led to the busiest week of the quarter at the PlasticsExchange trading desk. Buyers aggressively sought bargains as they took advantage of ample supply of most commodity grades, reported the resin clearinghouse in its Market Update for the week of June 20.
More abundant material, negative market sentiment, and lower energy and monomer feedstock costs led spot Prime polyethylene (PE) and polypropylene (PP) grades to peel off a couple more cents last week. Overall railcar availability has rebounded, but as resellers have destocked, not all commodity grades are easily accessible for immediate pickup. Resins packaged and ready to go demand a solid premium.
June PE contracts seem to be rolling steady after a contentious $0.03/lb increase was instituted across many processor accounts in May, according to the PlasticsExchange. The spot PE market had rallied several cents in April, when that increase should have taken hold. Instead, it peaked after none of the pending $0.06 to 0.07/lb increases were successfully implemented. Spot PE prices then went on to slide some $0.07/lb, so the timing has been a bit of a zig-zag. A series of increases remain on the table, but amid bulging upstream resin supplies, lagging exports, and some bearishness taking hold, it might take an extraordinary supply interruption to place pricing power back into producers’ hands. However, the hurricane season can heat up as quickly as the Gulf water temperature, the PlasticsExchange reminds processors.
Reversal of fortune in PE sales
PE sales were well above average this past week, a dramatic reversal from the lackluster activity of the past couple of months. The surge in trade flow came as producers were more willing to deeply discount material — some of it Prime, but especially off grade — to help clear out some of the inventory overhang, which had grown considerably, according to industry data for May.
Key commodity grades high-density (HD) PE for Blow Mold and low-density (LD) PE Film and Injection were the major movers, while linear-low-density (LLD) PE sales slowed compared with a week earlier. In the meantime, producers are still pushing for June increases of $0.03 to 0.05/lb, a portion of the initially sought increase of $0.06 to 0.09/lb. The reduced June increases follow the successful $0.03/lb hike for May and come as new capacity is anticipated to hit the market. The PlasticsExchange reports that it does not see much chance for the June increase to take hold. Flat contracts should be considered a win for producers, it adds. A nickel increase is on the table for July, but first things first.
PP transactions rebound
PP activity was the busiest the PlasticsExchange has seen in the last couple of months, both in terms of offers and completed transactions. Prices continued their downtrend and buyers that had been waiting on the sidelines came back to scoop up these better railcar deals.
There also has been a serious run on packaged PP truckload inventory, primarily for processors that waited too long to buy or otherwise delayed railcar deliveries. While PP import arbitration is still open, the downswing in US pricing and anticipation of new Canadian supply coming soon has limited buyer interest.
June PGP monomer and PP resin contracts have yet to fully settle for June, but will likely see a full dime decline.
Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website.