Spot resin trading slowed a bit as March came to a close, a noticeable turn compared with a week earlier, which saw robust trading and healthy volumes changing hands, reports the PlasticsExchange in its Market Update. It was really just a little quarter-end pause, as strong overall demand did not let up. Strained availability across most resin commodity grades was still prevalent, as more resin transacted on Friday, April 1 — no fooling! — than the rest of the week combined. Trading results for the first quarter of 2022 were very strong compared with Q4 2021, said the Chicago-based resin clearinghouse, but fell short of their year-ago performance, when the industry flocked to the spot market in the aftermath of the historic Houston freeze.
Polyethylene (PE) prices were mostly steady for a fourth week in a row, as spot prices had already advanced ahead of the March $0.04/lb price increase, which was finally implemented on its third attempt — contracts just needed to catch up. Spot polypropylene (PP) prices rose a couple of cents to match the year’s high, which had been established earlier in the month, as PGP costs began heading higher again. March PP contracts are jumping a solid dime, locked in step with the same rise in PGP contracts. There are fresh April increases on the table for both PE and PP resins. Export demand for US resin has also been chomping at the bit, but ongoing equipment and ocean freight constraints have kept a short leash on incremental offshore sales, leaving Mexico as the main surplus outlet for logistics challenged exports.
Commodity-grade PE resin pricing at season highs
PE trading may have slowed down alongside reduced volumes this past week, but strong sustained demand and overall tight availability kept commodity-grade pricing elevated at season highs. There were few new prime railcars to be had as the month drew to a close. Linear-low-density (LLD) PE was the primary mover, followed by lighter turnover of high density (HD ) and low-density (LD) PE resins. Prime materials from the PlasticsExchange’s market-making inventories outstripped total off-grade sales last week. Export offers were again limited as logistics constraints kept incremental shipments curtailed, so there was little reason for producers to pile on product to exporters already teeming with resin and backed-up ocean bookings.
Despite more production capacity on the way later this year, cost-advantaged North American PE producers also appear content to keep operating rates high and build more inventory, even as warehouses remain packed solid, rather than open the floodgates with excess supply. That might up-end the current rally in PE pricing.
Producers were able to implement their $0.04/lb increase on to March contracts, but they are not done yet, according to the PlasticsExchange. There is an April initiative on the table at an average of $0.06/lb. Securing the March increase has placed the PE market officially back on an upswing after decreasing some $0.15 to 0.17/lb in the fourth quarter of 2021.
Force majeures deal blow to PP production
PP trading was active, driven by good demand, tighter supplies, and rising feedstock PGP costs. As a result of these underlying factors, homo-polymer PP (HoPP) and co-polymer PP (CoPP) prices rose a couple of cents to match the season's highs established earlier in March. North American PP production was also dealt a significant blow during the week following a pair of force majeure declarations — one in Louisiana, the other in California — which will no doubt challenge resin availability even more. With supplies further strained, HoPP offers were on the lighter side and CoPP even less.
Demand was solid and the PlasticsExchange notes in its report that it did a good amount of business, which was mostly filled from its market-making inventory, while the crimped accessibility and bullish market tone challenged spot supplies and back-to-back transactions. Low-melt HoPP was the biggest mover with a heavy amount of wide spec transacting, followed closely by Prime low melt and Raffia grade. There were a number of Prime HoPP 12 and 20 melt deals as well as CoPP high flow and No Breaks completed, but as in past weeks, transacted volumes at the trading desk were limited by resin availability. The lack of prompt PP material and fresh force majeures encouraged the PlasticsExchange to continue re-stocking its inventories as well-priced offers were presented.
March PP contracts are expected to finalize with a dime increase, following the March PGP contract increase of the same level. There was not a concerted effort by producers to support the $0.04/lb margin-enhancing increase announced for April.
Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website.