Prime prices for both polyethylene (PE) and polypropylene (PP) held steady the first week of May, as relatively strong resin demand and hard-to-source prompt grades kept spot values buoyed, reports the PlasticsExchange in its Market Update. April PP contracts slid a cent in synch with the same drop in upstream PGP costs. PE producers caved to large contract buyers’ demands for April contract prices to roll flat to March levels, after industry indices estimated the same. The $0.06 to 0.07/lb PE increase will be attempted again in May, while another increase of the same magnitude will be pushed off until June. 

The May contract price initiatives come at a time when there has been no significant widespread event affecting production, unlike the 2021 Texas freeze followed by a noteworthy hurricane season. However, a number of resin producers for PE, PP, and even PS have force majeures in place, with some temporary supply allocations affecting product sales. The force majeures and allocations, combined with ongoing logistical issues — clogged railways, packed warehouses, port bottlenecks, limited railcars and trucks, and elevated freight rates — all continue to snarl supply chains. Buyers and sellers also have to contend with lofty energy prices and geopolitical uncertainty, namely the conflict in Eastern Europe and Covid-19 lockdowns in China. Another cloud on the horizon is the upcoming hurricane season, which officially starts on June 1.

Overall PE pricing static

PE activity and completed volumes slowed and overall pricing remained unchanged, writes the PlasticsExchange in its report. Completed volumes in its marketplace were well distributed between high-density (HD), low-density (LD), and linear-low-density (LLD) PE grades, with no particular standouts to highlight.

Processors and resellers still faced difficulties obtaining material because of limited railcar offerings, which have led to a run on packaged truckloads. PE producers have been providing limited spot prime railcar offers based on full proposed contract increases (along with price protection) rather than notching prices up a penny or two at a time as the month progresses. The all-or-none approach has complicated transactions, reports the PlasticsExchange.

While Houston warehouses are jammed full with resin, most of the material is already sold or destined for export awaiting ship space, which has been improving. March PE exports were among the highest on record, representing nearly 40% of total PE sales. It will be interesting to see if the export log jam cleared sufficiently to break through the two-billion-pound monthly barrier in April. Regardless of the upward pricing pressure brought on by strong demand and the challenge to secure material, April PE contracts settled flat from March. Producers already have plans to give it another go in May, with proposed increases at $0.06 to 0.07/lb, according to the Chicago-based resin clearinghouse.

Many Prime PP grades difficult to source

PP trading remained subdued while prices remained steady, but firm, as Crude ended higher and monomer continued to falter. PP resin supplies remained tight, with many prime grades difficult to source. Like many others in the market, the PlasticsExchange said it practiced caution in re-stocking the past several weeks while taking a wait-and-see approach to supply chain and geopolitical factors. Of the deals that were done, Widespec co-polymer (Co) PP and Prime homo-polymer (Ho) PP for Injection were the main movers. Very-high-melt HoPP was in demand, but there was little to be had. In the meantime, after April PP contracts dropped a penny, in line with same level decline in April PGP, producers are looking to rebound in May with a collective push for a $0.06/lb margin-enhancing increase, which would offset somewhat the likely large cost-related decrease coming down the pike. 

The May PP price initiative comes as three major North American producers remain on force majeure. Adding another layer of potential support to the May price nominations this past week, one producer announced it will allocate its PP resin products, while another producer has put a hold on all PP spot purchases. Both of these actions are likely to put further strain on availability. Altogether, the lack of prime PP railcars, but an abundance of off grade, alongside a slide in spot monomer prices could be evidence that producers have cut reactor rates below optimal levels. So, while contract prices should see a net decrease in May, the spot market could remain snug.

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