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Resin Report: Commodity Resin Pricing on Upward Trajectory

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Prime polyethylene (PE) and polypropylene (PP) prices edged a cent higher last week, while March PE contracts rose $0.04/lb and PP contracts jumped a full dime.

Robust demand, limited prompt resin supplies, and rising costs have kept upward pressure on commodity resin pricing, reports the PlasticsExchange in its Market Update. Seasonal demand, restocking efforts, and delayed railcar shipments all contributed to buy-side interest, added the Chicago-based resin clearinghouse.

Scarce availability among distributors and resellers has challenged back-to-back transactions, so the majority of sales last week were fulfilled from the PlasticsExchange’s market-making inventories, creating sizable restocking needs in order to maintain market liquidity for immediate resin shipments. As such, prime polyethylene (PE) and polypropylene (PP) prices edged a cent higher, resuming the 2022 rally after holding flat for the better part of a month. March PE contracts rose $0.04/lb while PP contracts jumped a full dime along with a commensurate rise in feedstock PGP costs. Resin producers continue pushing to keep margins high with price increases on the table for April and May.

Further tightening of resin supply

March PE inventories have come off a couple hundred million pounds from their record levels based on preliminary data, according to the PlasticsExchange. With much of the PE packed in warehouses and destined for export, this may add another layer of difficulty in securing material. Upstream PP inventories also have been trimmed, further tightening the supply/demand dynamic. Demand for North American trucks is likely to see a surge from the petrochemical and resin industry, as railroad congestion has prompted at least two Class 1 railroads to restrict and allocate traffic. At least one major resin producer has issued a force majeure on all of its polymer products. Another major resin producer based in the US Gulf also notified distributors and clients that it was experiencing outbound railcar shipment interruptions, and its daily outbound was being limited by its service railroad. The strain on rail congestion even pushed one major logistics provider serving the petrochemical and resin industry to announce a railcar surcharge this week.

Spot Prime PE rises a cent across the board

PE trading and volumes were noticeably lower the week of April 11 compared with the previous week, but demand has not let up in the face of tight availability. Spot Prime prices rose a cent across the board, as producers bolstered their April price increase efforts of $0.06 to 0.07/lb. Another freshly nominated increase, as much as $0.07/lb, is on the table for May.

High-density PE for Blow Molding again was the most active mover at the PlasticsExchange, with a good flow to domestic buyers as well as export to Mexico and Europe. Linear-low-density PE Film grades also saw steady sales and low-density PE Film grade trading was around average, while all PE Injection grades remained extremely difficult to source. While a heavy flow of the industry’s PE exports continues, incremental export options remain limited because of logistics constraints. Producers seemingly have throttled back reactors to avoid a burdensome overhang of material, writes the PlasticsExchange, noting that it could add to upward pricing pressure and help producers achieve additional contract gains in April and May.

Fresh force majeure, rail congestion hamper PP supply

The PP market had another very busy week driven by ongoing strong demand and tight supply, which came under further pressure following a fresh force majeure — bringing the total to three — alongside rail congestion and backlog issues. A third major resin producer announced it would seek a margin-enhancing increase of $0.06/lb for May, following the cost-push $0.10/lb increase in March. Completed spot volumes last week were above average, with co-polymer PP selling slightly more than homo-polymer PP. Overall sales at the PlasticsExchange were well spread out among grades and about equal between Prime and off grade.

Off-grade prices continued to rise and producer auctions yielded some very high levels, as resellers competed for product. A steady but relatively low volume of PP imports are reaching US shores, which has aided spot supplies. Falling ocean freight rates have made imports a bit more competitive, but considering timing, risk, port congestion, and high associated fees and tariffs, the prospects of large speculative buys have not become compelling, writes the PlasticsExchange.

The resin clearinghouse said that it maintains a bullish outlook on both PE and PP pricing as a result of the supply-side uncertainty in the market; elevated energy, feedstock, and operational costs; as well as logistics constraints amid solid demand.

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

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