It was a busy week at the PlasticsExchange trading desk from the get-go, with a steady flow of buy orders well distributed between processors and resellers, said the Chicago-based resin clearinghouse in its Market Update. The buying seemed to be driven more by normal seasonal demand rather than the fear buying observed earlier in the month. However, spot resin availability remained constrained. Aside from easy dealings supplied from its market-making inventories, the PlasticsExchange said it took extra effort to uncover relatively well-priced resin to complete other transactions.
Demand for good off-grade resins lifts prices
Prime polyethylene (PE) and polypropylene (PP) railcars were fairly scarce in the spot market, so good off-grade resins were sought, lifting the bottom part of the pricing spectrum. However, Prime PE and PP prices remained unchanged the week of March 14, as they had already advanced in anticipation of price increases implementing this month. PP contracts will gain somewhere in the vicinity of $0.07 to 0.09/lb, in line with an imminent increase in PGP contracts. While the jury is still out on the $0.04/lb PE increase, it is starting to seem that it will finally take hold on its third try of 2022. Producers have been digging in and even nominated a fresh April PE increase of $0.06/lb, on average, to add to the upward pricing pressure.
PE trading and volumes tapered off some last week, but sustained vigorous demand kept pricing for all commodity grades at the highest levels of the year so far. Low-density (LD) and linear-low-density (LLD) PE were the primary movers for a second straight week, followed by high-density (HD) PE Blow Mold. Supply remains very constrained, however, especially LDPE Film and Injection and LLDPE Film, where few fresh cars have been made available to the spot market and trader inventories remain very thin.
PE producers seek 0.06/lb increase in April
Resin availability was light — warehouses remained packed because of logistical challenges — and despite robust export demand, ship space to move incremental material offshore is limited. North American PE producers also seem content keeping operating rates high and building inventories rather than inundating the market with surplus supply, notes the PlasticsExchange. “As we have previously suggested, they will eventually need to figure out a way to move more material export, especially as new production capacity is on track to come online during the year,” writes the resin clearinghouse in its weekly Market Update. In the meantime, producers are building on the moderate upward momentum and are unwavering in their collective push for a March price increase of $0.04/lb., which is now likely to implement, and they have come out in full force for an additional increase in April with initiatives averaging $0.06/lb and as high as $0.07/lb.
Tight PP supply prevents price erosion
It was another solid week for PP trading. While not record setting, a wide range of deals were completed. A downward retracement in PGP may have limited the increase in March PP contracts away from double digits, but supplies remained tight enough to fend off any spot price erosion. Strong demand for most grades kept PP prices elevated at 2022 highs, with matched orders at the PlasticsExchange still largely dependent on availability of material as most buyers were price takers.
Co-polymer PP was the main mover, while homo-polymer PP trading volumes eased, a reversal of activity from a week earlier. As crude oil retreated in the first half of the week, PP offers improved slightly, facilitating some Prime transactions. With feedstock and energy rebounding in the back half of the week, PP demand was met with fewer Prime offers and at elevated prices. As a result, more off grade transacted late in the week.
With PP inventories balanced to tight and lack of a safety valve in timely imports to supplement the market, prices will continue to fluctuate with energy and feedstock prices. They will see even more sensitivity should those markets move to the upside. It would not be surprising to see producers also announce a margin-enhancing increase, according to the PlasticsExchange. In the meantime, March PP contracts are likely to see a strong single-digit cost-push increase of about $0.08/lb, following direction in PGP this past month, despite the two-week downtrend in spot levels.
Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website.