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Resin Report: Bountiful Supply Keeps Prices in Check During Thanksgiving Week

Growing upstream resin supply and spot availability point to further pricing softness ahead.

November 30, 2021

3 Min Read
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Image: Peshkov/Adobe Stock

A short work week because of Thanksgiving and more plentiful resin availability tag-teamed to produce fairly lackluster trading in commodity resins, reports the PlasticsExchange in its Market Update. Negative market sentiment prevailed amid bearish supply/demand pressure, as upstream resin supply has grown and spot availability has become more plentiful, said the Chicago-based resin clearinghouse.

Spot prices for both polyethylene (PE) and polypropylene (PP) have been consistently whittled down over the past several months, and while downward pressure persisted, all PE and PP grades managed steady this past week. The general market belief is for continued pricing softness ahead. The decline in Houston export prices has piqued interest from international traders, and while incremental volumes are moving, mostly to the south, further discounting is still needed to divert high-volume demand from other regions, according to the PlasticsExchange.

Third straight monthly decline for PP contract prices

Current oversupply has led to another month of price relief, as PE contracts look to lop off a second straight monthly nickel in November. Many believe a third $0.05/lb decrease will be forthcoming in December. PP contract prices are on their way to a third straight monthly decline in November, following direction from PGP contract levels likely to see a commensurate decline of $0.09 to 0.10/lb. This would bring the three-month drop into the low 20-cent range, and it seems that it could go even lower in December. It will be interesting to see if resin producers are able to liquidate enough surplus inventory by the end of the year to regain pricing power, notes the PlasticsExchange.

Although domestic PE pricing was flat, trading was still fairly active in the Thanksgiving-shortened week. Commodity Film grades of low-density (LD) and linear-low-density (LLD) PE were the biggest movers in terms of volume, followed by high-molecular-weight (HMW) for Film and high-density (HD) PE Blow Mold. Lower volume commodity resins like LDPE and LLDPE Injection maintained the strongest premiums, as availability is improving slowly. Despite a flurry of Film PE changing hands during the week, some Film and Pipe grades are somewhat tight following a force majeure in Texas earlier in the month. Resellers have maintained limited uncommitted quantities of material on hand, so prompt premiums remain; however, since domestic PE railcar availability has improved, most grades are readily available with a three-week notice. 

Including November, PE contracts have now dropped a dime in two months, catching up (or down, if you prefer) with spot levels, which have led the down leg of this cycle. The PlasticsExchange believes the market has more downside ahead, though it has already begun to lightly restock its depleted market-making inventories.

Homo- and co-polymer PP grades in relatively tight supply

PP trading activity was not as robust as PE, as growing supply and better availability kept patient buyers on the sidelines, sensing cheaper prices ahead. There was a strong flow of mostly off-grade and some down-graded prime domestic railcars in the spot market at nicely discounted levels.

High-flow homo- and co-polymer PP grades remain relatively tight following a force majeure declared earlier this month and command a premium, with pricing generally still above $1/lb. Additional inventory strain is expected in December, as one PP supplier is taking a planned maintenance turnaround at its Texas facility.

The overall downward trend in pricing, along with falling monomer costs, is translating to another sizable decrease in November PP contracts, which brings the three-month relief to more than $0.20/lb. Most importers have largely depleted their uncommitted PP stocks; high freight costs and logistical delays continue to keep PP imports from moving into the United States. While some additional weakness is expected, the PlasticsExchange advises keeping enough material on hand, as sustained low imports could lead to categorically short supply as it did before weather-related disruptions impacted the market earlier this year.

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

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