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Resin Report: Prices Remain High, Despite Packed Warehouses and Few Export Opportunities for Producers

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As more capacity comes online during the year, producers will have to find a way to move surplus resin at some point. In the meantime, more price increases are on the table.

Strong demand continued in the spot resin market last week amid strained availability for commodity grades, reports the PlasticsExchange in its Market Update. Prime polyethylene (PE) and polypropylene (PP) prices were unchanged for a third week at the trading desk, as spot levels had already advanced ahead of the current contract price increases being implemented this month.

PE producers are finally sealing their $0.04/lb increase in March on their third attempt this year. There is another PE increase on the table for April, averaging $0.06/lb. PP contracts are following PGP contracts higher, estimated at a $0.08 to 0.10/lb increase; a margin-enhancing increase of $0.04/lb also has been nominated for April.

There is strong underlying export demand for US resin, but ocean freight constraints have limited offshore sales, leaving Mexico as the most viable outlet for incremental export PE and PP resin.

PE resin pricing stabilizes at highest levels of the year

PE trading and volumes improved on the week, as sustained demand kept pricing stable at its highest levels of the year. Low-density (LD) PE and linear-low-density (LLD) PE film grades again were the primary movers, followed by relatively limited activity in high-density (HD) PE for Blow Molding and Injection. Prompt availability of LDPE and LLDPE injection grades has not improved much and very few fresh cars have been seen, according to the PlasticsExchange.

The logistics picture is much the same: Warehouses are packed and shipping space for export is lacking. Producers have limited incremental offerings, perhaps in fear that cheaper resin destined for export instead will make its way into the domestic market. In the meantime, production and upstream resin inventory are well above levels compared to a year earlier in the aftermath of the Texas freeze that took a majority of resin units in the region offline.

North American PE producers maintain a significant cost advantage compared with their international counterparts and appear content to build up stockpiles rather than flood the market with excess supply and compromise the moderate upward pressure on resin pricing. But with more capacity planned to come online during the year, producers will have to find a way to move surplus material at some point. Until then, they are undaunted in their collective push for a $0.04/lb increase in March, which is expected to finally implement. They will soon begin posturing for their next proposed increase in April, which averages $0.06/lb and could be as high as $.07/lb, according to the PlasticsExchange.

Overall PP resin availability remains tight

PP trading remained good, as market participants continued sparring over price expectations driven by uncertainty in energy and feedstock costs and the overall balance between supply and demand. Transactional volume was consistent throughout the week, with Prime dominating activity in the first half, while wide-spec deals were more notable Thursday and Friday (March 24 and 25).

Low-melt homo-polymer PP was the volume leader at the PlasticsExchange, while demand for high-flow co-polymer PP was not completely satisfied because of the lack of well-priced supplies. High-quality off-grade railcars were bid up, leaving dribs and drabs of imported resin already here as a competitive supply alternative. Overall PP availability is still fairly tight, so when good opportunities present themselves, buyers are advised to act quickly to secure material before it’s gone, writes the PlasticsExchange.

Strained availability and firming spot prices, which have risen some $0.12/lb since the start of 2022, prompted one major resin producer to announce a margin-enhancing increase of $0.04/lb in addition to any change in US PGP pricing between March and April. The margin-enhancing increase comes alongside stronger PGP prices, as well, which have firmed $0.20/lb since the start of the year. Contract PGP prices have increased $0.06/lb through February; given that another $0.08 to 0.10/lb increase is ready to confirm for March, prices will be up a net $0.14 to 0.16/lb during the first quarter.

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

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