Let’s make a deal — that was the clarion call in the spot resin trading market as the first month of the new year drew to a close. Heightened activity came from both buyers and sellers, as processors sensed a possible bottom and change in price direction and procured material to restock inventories. Several packaging and rail delays also sent resellers to the spot market for prompt truckloads, some in large multiples, to fill in supply gaps while waiting for their resin to be ready. In its Market Update, the PlasticsExchange reports that the week of Jan. 24 was its highest volume trading week since May of last year.
The flow of polyethylene (PE) and polypropylene (PP) railcar offers was noticeably lighter and spot supplies tightened up a bit. Overall availability was still ample for most grades, but by no means was the market awash in resin. Still, there were some surprisingly good offers that almost seemed out of place, and they were snatched up quickly.
Prices for several PE grades stepped a cent higher, and though prime PP levels stayed steady at the Chicago-based resin clearinghouse, the lower end of the pricing spectrum continued to firm up. By the end of the week, very few fresh prime offers remained and with February right around the corner, suppliers began to posture in regard to the $0.04/lb PE increase targeted for both domestic and export markets, which is expected to be added to asking prices this week.
The spot PE market was active, with high volumes of material changing hands in both the domestic and export markets. Most PE grades added another penny this past week, including high density (HD) PE for Blow Mold and Injection, supported by good domestic demand, while low-density (LD) PE and linear-low-density (LLD) PE film grades were aided by strong exports. Spot supplies for other materials such as LDPE and LLDPE for Injection remained tight, but their prices stayed put.
Force majeure at Memphis facility
The PlasticsExchange reports numerous inquiries for film-grade resins with slip and anti-block additives following a fire and subsequent force majeure on products from a slip manufacturing facility in Memphis earlier in the month. Downtime at the Memphis facility is expected for another three to four weeks. The short-term but meaningful shortage of fully formulated film grades has left some processors scrambling for material.
There were few fresh producer-offered PE railcars made available during the week, though some traders still had material to move. As offers were sold, they were refreshed with lower volumes at higher prices considering higher replacement costs come February. January PE contracts have yet to be finalized, but the PlasticsExchange said that it maintains its month-long view that they will roll flat, leaving the $0.04/lb nomination on the table for February. Resin producers announced their intention to increase contracts by an additional $0.04/lb in February, too, with one outlier initiative at $0.05/lb on HDPE and LDPE, and $0.07/lb on LLDPE. The proposed price increases come as PE supplies tighten amid healthier exports and a planned turnaround at one facility in Texas.
Deep discounts disappear from PP resin market
PP trading was good and transactions ran above average, but still fell short of the elevated pace seen the past couple of weeks, when buyers scooped up deeply discounted offers which have now seemingly disappeared from the market. Spot Prime PP prices remained flat and still sit $0.02/lb above mid-January lows.
Deals were once again completed across most of the PP family; co-polymer PP was the main mover amid a heavy amount of mid-high-melt good off-grade selling, with some Prime sprinkled in. The overly loose supplies seen during the fourth quarter and into January have now tightened up, eliminating some of the discounts that had been available. Homo-polymer PP sales were reduced but there was still a notable amount that transacted, with slightly more off grade than Prime. Strong crude futures contributed to the pick-up in demand, but with PGP practically flat through the week, there was not yet enough cost-push pressure to elevate prime prices further, according to the PlasticsExchange. Ideas for January PP contracts have mostly targeted a rollover, even as PGP recovered and settled flat. The push for a modest decrease in margin/price of $0.03/lb also remains possible. However, tightening supplies have limited the need for producers to give back margin expansion earned during 2021.
After such a large fourth quarter retrenchment following the massive gains of the first half of 2021, the PlasticsExchange writes that it continues to hold a slightly bullish perspective on resin pricing and can see a gentle upward trend developing. “We do not feel the market will absolutely spring to the upside right now, but with crude oil at a new seven-year high lifting international resin prices and supply/demand now a bit better balanced, we feel that this burgeoning resin rally does have the potential to accelerate at a later date.”
Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website.