The new year got off to a blazing start in the spot resin markets. Trading activity began as 2022 rolled in and continued to improve through mid-January, producing the best two-week performance since October at the PlasticsExchange trading desk.
Polyethylene (PE) and polypropylene (PP) resin availability was fairly flush the first week of January, reports the PlasticsExchange in its Market Update. As resin sold, producers became a bit bolder with their offers and material tightened up a bit into mid-month.
While pricing has varied in the spot market, the official prime levels have held steady so far in early 2022. The lack of prime pricing movement could be construed as somewhat bullish, having bucked the steady — sometimes extreme — fourth quarter price erosion. PE producers signaled their desire to stem the slide in late December by issuing a mostly $0.04/lb price increase for January contracts. While the spot market has been exhibiting some firmness, it does not seem likely that the increase will take hold, and some buyers even remain hopeful for additional price relief this month, according to the PlasticsExchange. Very little movement is expected in PP contracts in January, though the spot market is beginning to firm back up.
Shortage of truck drivers hits resin suppliers
To better balance supply and demand, resin producers curtailed production of both PE and PP during Q4 while also trying to export as much material as possible. However, producers and resellers continue to face difficulties moving all the desired inventory because of supply-chain issues — a lack of containers, personnel, and ship space. The shortage of truck drivers has hit petrochemical and resin companies especially hard, as packaging materials, labor, warehousing, freight, and terminal costs keep increasing. Petrochemical producers have already announced updated freight surcharges for January.
An ongoing shortage of peroxide which helps to increase PP melt flow has created scarcity in high-flow PP materials. PE Film grade resins are likely to see tight availability for slip additives from one large supplier following a fire and subsequent force majeure on products from its Memphis, TN, facility during this past week.
Upward international resin pricing pressure is also coming from the energy futures complex, which realized further gains as Crude Oil prices rose for a fourth consecutive week, and Nat Gas trended higher for a second straight week.
PE resin trading rebounds
The resurgence in PE trading activity was spread across a good mix of most high-density (HD), low-density (LD), and linear-low-density (LLD) PE grades. Supplies had improved substantially in December, including better availability for the less liquid grades like LDPE and LLDPE injection, which had remained scarce the longest. Relatively large volumes of these injection grades have again been selling into the happy hands of buyers in need. HDPE for Blow Mold and Injection were quite loose as the calendar turned, but spot supplies of these grades have tightened substantially into mid-month. LDPE Film grades have remained plentiful in January and demand has improved, especially for Frac Melt, so good volumes have been changing hands across its platform, writes the PlasticsExchange. All LLDPE Film grades, including butene, hexene, octene and metallocene, remain exceedingly tight. Most fresh offers sold to waiting buyers with nary an excess pellet floating around long. In the meantime, it is still too early to gauge the prospects of the nominated January contract increase.
December PE contracts were confirmed at a decrease of $0.05 to 0.07/lb, which closed Q4 with as much as $0.17/lb of price relief. Although the December contract price came down, PE contracts finished 2021 up a net $0.24 to 0.26/lb increase for the year. Should producers not find success with price increases announced at $0.04 to 0.07/lb in January, they could realize a better opportunity in February as they seek to tip the supply/demand balance back into the sell side, according to the PlasticsExchange.
Solid sales for very-high-melt homo-polymer PP used for face masks
PP trading was solid the first two weeks of 2022, with a good mix of homo- and co-polymer offers coming to market alongside better demand. Completed volumes improved further after a strong close to 2021, notes the PlasticsExchange.
Pricing for Prime PP grades remained under $1.00/lb, with the homo- and co-polymer PP spread still running at $0.08/lb. December PP contracts were finalized in early January at a $0.14 to 0.15/lb drop from November, a dime of which can be attributed to PGP contracts and up to a nickel of PP margin contraction. The decrease in December PP contracts capped off 2021 with a decline of as much as $0.415/lb over the past four months, although 2021 contracts still managed to end the year up a net $0.215/lb, reports the PlasticsExchange.
After working down imports and waiting out the market as it declined throughout Q4 of 2021, buyers started getting back into the market and picking off truckloads here and there, but demand enhanced only slightly alongside flush inventory levels and very good availability. However, the first week of January saw solid sales for homo-polymer PP very high melt (melt blown) used for face masks as well as homo-polymer PP Raffia, co-polymer PP 20 melt and above, as well as Prime co-polymer PP Random Clarified at a variety of melt flows. There were plentiful offers for Prime and widespec homo-polymer PP railcars, as well. Higher quality material sold quickly, while low-end material lingered. This past week saw some good turnover of both bulk railcar and packaged truckloads, as processors restocked with more vigor. Should PGP pricing show additional strength in January, it may prompt a more aggressive rush of additional buyers into the PP market.
Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website.