Resin availability continued to improve last week, and average prices for commodity polyethylene (PE) and polypropylene (PP) resins fell by $0.03/lb, with some variance by grade. Market sentiment is now considered bearish, reports the PlasticsExchange in its weekly Market Update, as processors with non-urgent demand wait on the sidelines for cheaper prices ahead. Once again, buyers with an immediate need for material were pleased with lower pricing yet still only picked away with limited volume orders.
Producers seem to be feeling the pressure of their bulging inventories, and many public warehouses are already filled to the brim. The PlasticsExchange reports seeing more consistent discounting for spot material, both to facilitate higher export volumes out of Houston and to meet competitive offers for domestic accounts. It is highly unlikely that producers will be able to implement either of their nickel-per-pound price increases for PE and PP contracts in October; on the contrary, a case can be made for a nickel or so price decrease to come through. Do not be surprised, however, if producers manage to hold PE contracts flat for the third month in a row, cautions the Chicago-based resin clearinghouse. PP price relief is imminent with the October PGP monomer contract settlements now expected to decrease by double digits, and it remains to be seen if margin erosion also will start to set in.
Resin suppliers chasing buyers
While the market is not totally awash in resin, the shift in sentiment has suppliers chasing buyers as opposed to buyers chasing resin. All markets cycle, and this correction was not a surprise after such an extreme and unprecedented rise in prices. PE contract prices soared some $0.41 to 0.43/lb in 2021 and a whopping $0.65 to 0.67/lb since the last market trough amid the COVID quarantine in May 2020. PP prices saw gains of $0.54/lb and $0.855/lb in the same period. As is typical in a down-leg cycle, offers are available for material that is ready two to three weeks out, while premiums are still commanded and warranted for immediate availability, rewarding or at least easing the hit on those who took the risk to carry on-hand inventory, writes the PlasticsExchange. Further price erosion in both spot and contracts is expected in Q4. If producers are able to liquidate enough material before the end of the year, a new up leg in the market may come in January, according to the PlasticsExchange, although prices would be starting lower than they are today.
High-density PE supplies improve
Spot prices for most commodity-grade PE resins shed $0.01 to 0.03/lb the week of Oct. 11, as ample inventory and soft demand fed more price erosion. In a relatively rare occurrence, PE trading was outdone by PP activity at the PlasticsExchange trading desk. While daily dealings were fairly consistent, total weekly volumes were not as robust compared to peak levels several months earlier. High-density (HD) PE for Injection and Blow Mold, which had been some of the more difficult commodity grades to procure this year, continued to change hands more frequently as supplies improved in October. Better availability for these HDPE grades has been eating away at the large premiums in place since February. Low-density (LD) PE for Film and Injection also was actively sought both by processors and resellers; prices for LDPE and linear-low-density (LLD) PE Injection grades were the strongest of the bunch and managed steady. Despite the decline in domestic spot PE prices over the past couple of months, production challenges remain. Some companies are still under force majeure or allocation programs, PE maintenance outages are still planned throughout Q4, and operating rates are gradually returning to normal following the impact of Hurricane Ida in September, which took a chunk of production offline in Louisiana.
High-value PP resin grades still challenging to source
PP prices chunked off another $0.03/lb, just one week after dropping $0.06/lb, its deepest decline of the year. Sales picked up significantly, as traders unwound positions in the face of improving supply and falling PGP costs. Completed volumes heavily favored Prime packaged co-polymer PP and homo-polymer PP Raffia; the majority of sales were for ready-to-ship imported material alongside some domestic railcars. Although availability has improved, the domestic market is not overly flooded with supply. There was good availability of fresh Prime and Widespec homo-polymer PP railcars as well as packaged truckloads of most grades. Sourcing higher value PP resins grades, such as co-polymer PP Impact, No Break, and Random Clarified, was still somewhat challenging in terms of domestically produced material (import supplies have been largely depleted by now). Exports also have been increasing again, a sign that producers see their inventories as sufficient, at least given the current cost structure.
Read the full Market Update, including updates on PGP pricing and energy futures, on the PlasticsExchange website.