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Resin Report: Supply-Chain Issues Continue to Snarl Activity

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Logistics logjams are sending processors and resellers to the spot resin market for ready-to-ship truckloads to bridge supply gaps. 

The resin spot market got off to a slow start the week of Feb.14, but the pace of trading picked up as the week wore on, according to the PlasticsExchange. Demand was good with buyers willing to pay up a bit; however, availability remained generally tight. Cheaper transactional levels seen earlier in the month are but a memory now, as resin processors keep watch on lofty energy and feedstock costs and its influence on downstream markets. The PlasticsExchange writes in its Market Update that it continued to see the bottom end of the pricing spectrum snug up, while benchmark prime prices for domestic spot polyethylene (PE) and polypropylene (PP) remained steady, leaving this quarter’s small rally idle for the time being, as market sentiment remained steadfast and strong.

Shipping difficulties forecast for much of 2022

Supply chain and logistics remain key problems that continue to hinder incremental US resin exports. A number of exporters still have resin in Houston warehouses. Port congestion, limited ship space, and high demand for shipping containers is forecast for much of 2022, along with elevated ocean shipping costs and high freight rates. Added resin production capacity has further strained railcar availability which has already been tightened by rail delay as well as the shortage of warehouses and labor personnel to package and return cars to producers, reports the PlasticsExchange. These types of logistics issues continue to send processors and resellers to the spot market for ready-to-ship truckloads to bridge supply gaps. Meanwhile, Canadian resin processors are also dealing with blocked roadways and bridges into and out of the country because of protests, which further add to shipping delays. The combination of delivery and supply-chain challenges has already prompted resin producers and trucking companies to increase logistics costs throughout the first quarter.

Some PE grades difficult to source

PE trading last week was good, but not great, writes the PlasticsExchange. Although official industry figures suggest that collective producer inventories continue to grow substantially, the word on the street tells a different story.

Spot resin is relatively tight and some materials, including most prime linear-low-density (LLD) PE grades for film, are still outright difficult to source. In general, domestic off-grade PE prices were mostly steady with a firm undertone, while prime material was lightly available and still reflected the $0.04/lb increase sought for February contracts. Most major resin producers are holding firm on their price hikes for upcoming February PE contracts, even after one company announced a revised effort to implement a smaller increase. Aside from this more modest two-cent hike, current price increase nominations are mostly $0.04/lb with one outlier at $0.05/lb on high-density (HD) and low-density (LD) PE, and $0.07/lb on LLDPE. Even late in the month, implementation of the current increase is uncertain. If it’s not successful, it will be tried again in March. The February increase comes after January contracts settled flat, with producers failing to get their proposed increases at an average of $0.04/lb; PE contracts decreased an average of $0.17/lb during Q4 of 2021, but are still up an average of $0.25/lb for last year.

Strong demand for PP resin sends prices higher

PP trading was more active compared to a week earlier, as strong demand sent completed volumes well above average. Availability was sufficient, though prices for good off-grade material rose a couple of cents and offers for prime material thinned out as material sold. Co-polymer PP was the main mover of the week, with wide-spec high melt leading the way and Prime Random Clarified following close behind. There were also numerous mid-melt homo-polymer PP deals done, both Prime and wide spec. Upstream PP inventories ended January above average before a PP force majeure in the Northeast added strain on supply this month.

Prime PP prices have been up about $0.05/lb so far in February, following an upturn in spot PGP levels. The PlasticsExchange expects February PP contracts to see a moderate single-digit increase, at least a nickel or more based on an imminent rise in PGP contract costs, while better balanced supply/demand dynamics should keep producer margins relatively stable after moderating in late 2021. PP contracts were down $0.415/lb over the last four months of 2021, but were still up $0.215/lb for the year.

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

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