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Resin Report: Producers Slow-Walk Sales in Anticipation of More Price Hikes Ahead

Image: Peshkov/Adobe Stock weekly resin report stock image
PE commodity grades moved up another penny and PP added two cents in the spot market last week. A harbinger?

In the final week of February, buyers were again the aggressors, trying to rebuild inventories at favorable pricing. Sellers with surplus resin, on the other hand, were slow to dole it out, as it seemed that prices were heading higher, reports the PlasticsExchange in its Market Update.

The flow of fresh off-grade railcars lightened during the week, bringing mostly homo-polymer polypropylene (PP) and high-density polyethylene (PE) for pipe and injection. Several other major commodity grades, including high-flow co-polymer PP, low-density PE, and linear-low-density PE film grades remained fairly scarce.

Completed volumes at the PlasticsExchange trading desk were well above the results seen during the fourth quarter of 2021, but still fell short of the hyper-active trade a year ago following the Texas freeze, which brought production in that region to a halt and sent buyers to the spot market for material. Benchmark prices for Prime PE and PP at the Chicago-based resin clearinghouse were steady to mostly higher, with penny gains for most PE grades and a 2-cent jump for PP. Buyers staved off PE producers’ second monthly attempt to raise contract prices by an average of $0.04/lb, so there will be a third attempt in March. PP contracts increased $0.06/lb in February, aligned with a similar rise in PGP monomer costs.

Russian aggression further strains resin supply chain

There was a lot of market chatter, as participants considered rapidly rising energy and feedstock costs and what it could mean for resins, especially as conflict commenced between Russia and Ukraine, writes the PlasticsExchange. This added geopolitical issue is putting further strain on an already delicate supply chain and logistics constraints that have hampered US resin exports significantly. Warehouses in Houston remain full because of port congestion, limited ship space, and high demand for shipping containers. More of the same is forecast for much of 2022, along with elevated ocean shipping costs and high freight rates. 

Hopper cars and trucks are in short order, as well, caused by delays and extended lead times in addition to limited warehouse space and a shortage of personnel to package and return cars to producers. Added production capacity has already stretched railcar availability; more is expected, with just under four million tonnes of new resin capacity planned in North America by the end of the year.

Prime PE grades remain scarce on spot market

Producers are evidently not afraid to keep building inventories during this transitionary pricing period, which could lead to an acceleration of the recent uptick, notes the PlasticsExchange. 

Despite February contracts settling flat, most PE commodity grades moved up another penny in the spot market, up as much as 0.06/lb so far in this young year. Even though upstream resin inventories continued to grow, as expanded capacity has been hampered by export constraints, most prime PE grades remained relatively scarce in the spot market while warehouses bulge with record supplies, according to the PlasticsExchange.

Very few fresh prime railcar offers were seen for either domestic or export sales in late February, as producers position availability ahead of their third attempt to implement at least a $0.04/lb price in March, seeking to reverse the $0.17/lb slide in Q4 2021 PE prices. With Crude Oil briefly surpassing $100/bbl for the first time since 2014, other commodities priced sky-high alongside rampant inflation, and the threat of massive geopolitical disruptions, resin prices currently down some 40% from the 2021 highs seem like a bargain and could surge again this year.

Spot PP prices up 7 cents so far this year

PP trading remained strong and spot prices added another $0.02/lb. Prices have risen 7 cents this year and could just be picking up steam. While demand was solid, the PlasticsExchange said that completed transactions lagged compared with the previous two weeks, as there was not enough well-priced material to satisfy its spot order flow. Processors are still a bit shaken from the 2021 market, when PP resin transacted at $1.50/lb or even higher. While prices have retraced some 40 to 50% to more familiar levels, any sort of meaningful price jump has buyers shaking again. This past week was a stark eye-opener, added the PlasticsExchange.

An explosion at a refinery that makes PGP contributed to a sharp spike in spot PGP costs. If sustained, it could translate into a quick double-digit gain in March PP resin prices. This is on top of the $0.06/lb hike already endured in February. Savvy buyers have been rebuilding PP resin stocks at these seemingly bargain prices, but a wider group of buyers took notice late in the week and also came running to buy resin. Upstream PP inventories have already backed off from peak recovery levels, so supply has turned tighter and is teetering on super snug if any meaningful resin production disruptions were to develop. Imports are available to the market but the resin is overseas, and with ports and logistics still a mess, limited buyers are ready to engage in this supply alternative again.

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

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