The resin market turned sluggish, as both polyethylene (PE) and polypropylene (PP) railcar availability improved and off-grade discounts steepened, which also helped to enable transactions.
Prices for both commodity groups had each dropped a solid $0.03/lb in the previous week, though PE recouped a penny since then, while PP remained steady with a weaker undertone. May PP contracts were down a net $0.07/lb and PE contracts are still unsettled, but are now leaning toward a $0.03/lb increase, reports the PlasticsExchange in its weekly Market Update.
Chinese resin demand has been picking back up and prices have been supported by rising Crude and Naphtha-based feedstocks, though the PP import arbitration from Asia is still open and modest volumes are trickling in. Houston PE prices slid a bit more, keying up additional export sales that still need to improve as Houston warehouses remain full of resin. Outgoing ocean freight to various regions is now booked into July, so much of that material indeed is destined to ship overseas.
The PlasticsExchange said it saw a slowdown in PE dealings the week of May 30, along with a small penny bounce from the large three-cent loss of the previous week. The market has been in a strange flux as May contracts had not officially settled even as the calendar turned to June. There was some special month-end pricing on several groups of select Prime PE grades that were mostly for export, but the deep discounts were not widely distributed.
Still, some savvy processors probed the market with low-ball bids, though suppliers were not really chasing the orders. Instead, while it seemed that the May $0.06 to 0.07/lb PE increase was failing, as it ultimately did in April, producers have been steadfast in their attempt to preserve and improve margins and keep prices from eroding. Some have revised their proposed May increase down to just $0.03/lb and that seems to have traction.
PP contracts went the other way in May. A $0.10/lb decrease in PGP costs was partially offset by a $0.03/lb margin increase, for a net drop of $0.07/lb — a win/win for both producers and processors.
Spot PP trading was slow as May came to a close and picked up a tad as June began. Prime prices managed steady after falling $0.03/lb the prior week, but still seemed shaky as spot monomer markets already point to a June decrease. There was good discounting on off-grade railcars, but suppliers with on-hand inventory were not willing to budge on price. With delayed railcars creating urgency for packaged resin, there is an ongoing premium for prompt resin for immediate delivery.
Upstream PP inventories ended April only average, and the softness in monomer suggests that reactor rates remained restricted during May, and it was this supply tightness that facilitated the margin price increase.
There are additional gains sought for June and with the 2022 hurricane season now underway, keeping a few extra pellets around might be warranted even as feedstocks fall.
Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website.