Good buyer interest continued the week of May 16, as packaged truckloads bridged the supply gap between late railcars, which has become a notable trend, reports the PlasticsExchange in its Market Update. Deals were sporadic, however, with surges of activity sandwiched between periods of relative quiet.
Pricing held steady for polyethylene (PE) and polypropylene (PP), but with a weaker undertone — the market has been facing downward pressure from lower monomer costs and waning sentiment. Persistent geopolitical uncertainty fueled by the war in Ukraine and Covid lockdowns in China, as well as the ongoing global supply chain squeeze, rampant inflation, and recession concerns continue to rile the resin market.
Some PP resin buyers stay on sidelines, awaiting price decrease
PE has not regained its upward momentum after failing to secure any of the $0.06/lb price increase in April. Producers have attempted to implement the delayed increase in May, but it does not seem that it will stick this month, either, writes the PlasticsExchange. Some PP buyers, eyeing a net price decrease for May contracts, have held off larger purchases as they await the imminent monomer cost–related price relief, which could be a dime or so. The decrease will be somewhat offset by a $0.06/lb margin-enhancing increase that producers are seeking, which should still yield a net drop of perhaps $0.04 to 0.05/lb, or more.
PE activity and completed volumes improved over the previous week, which was also quite active. Film grades were the biggest movers across the PlasticsExchange marketplace once again. Linear-low-density (LLD) PE outsold low-density (LD) PE; high-density (HD) PE transactions did not keep pace, and business was well spread between Blow Mold and Injection grades.
Few Prime PE railcars were offered in the domestic spot market, as producers dug in their heels to enforce their $0.06 to 0.07/lb increase that had rolled over from April. Another increase of the same magnitude is on the table for June. However, late in the month, the increases do not seem likely to take hold right now, according to the PlasticsExchange.
Off-grade PE railcars continued to flow, and at lower prices, while Houston export prices were also a tad weaker. Export sales to Mexico were solid, and though there was interest from other regions, those dealings were disabled by elevated asking prices and the strong value of the US dollar. Houston warehouses remain packed full of material and over eight billion pounds of new production capacity is set to come online before the end of the year. One new plant reportedly is already making off grade and is expected to bring Prime pellets into the market sometime in June or July. Unless international PE prices soar, US producers probably will need to reduce export pricing to move incremental material.
PP trading picked up again last week, though buyers often were seeking truckloads rather than railcars. Off-grade railcars flowed and those prices slipped, particularly for Houston shipments, as producers were keen to get quick a return of their cars.
Overseas freight costs drop
Widespec co-polymer (Co) PP mid melt, Prime homo-polymer (Ho) PP low melt, and Prime CoPP mid melt accounted for the majority of completed volumes at the Chicago-based resin clearinghouse. The cost for incoming overseas freight has dropped substantially, and while arbitration is open and some fresh PP imports are headed this way, traders generally remained cautious.
Producers’ collective PP inventories entered May at the lowest level since August 2021. With hurricane season right around the corner and supply/demand relatively balanced to tight, PP producers are looking to offset a PGP cost–related decrease at hand this month as they push for a $0.06/lb margin-enhancing increase for May. At least one producer is seeking another nickel for June.
The May and June PP price nominations come amid a few ongoing force majeure and sales allocation programs still in place. One major producer said during the week that he does not know how long the PP force majeure at its New Jersey facility will last because of additional equipment failure and unplanned maintenance that is needed.
Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website.