Resin trading brisk heading into the holidays

December is bringing a flurry of resin trading, making the month look like it will be the highlight of the year, reports the PlasticsExchange in its weekly market update. Transactional volume for both polyethylene (PE) and polypropylene (PP) continued to be very strong and their commodity grades slid $0.01 to 0.02/lb. December PE contracts will likely settle flat for the third month in a row, as the nominated nickel increase is now pegged for January. Although producers are looking to raise PP contracts again this month, it is quite possible the market will just take a breather in December.

Implementation of the recent series of PP increases has varied among market participants in both timing and magnitude, and some consolidation could be warranted. International crude oil and downstream monomer costs have fallen precipitously; consequently, export demand also has contracted. This little lull is providing Houston warehouses a chance to fulfill prior packaging and shipment commitments.

Another major wave of selling hit the energy markets this past week, driving prices to fresh multi-year lows.

The spot ethylene market saw a spate of activity early in the week before quieting down, according to the PlasticsExchange. All Gulf area crackers are running at or near full capacity, which is weighing on the market. Ethylene for December delivery sold below $0.18/lb for the first time in seven years and most recently changed hands at $0.185/lb, down more than a penny.

The spot PE market continued to transact at a rapid rate. There was good availability for most commodity grades, and spot prices dropped $0.01 to 0.02/lb. While there has been a smattering of railcar offerings, the material has generally been off grade rather than prime. Resellers have been aggressively marketing their uncommitted warehoused resin, both prime and off grade, and processors are taking advantage of the discounted pricing, particularly to provide an inventory buffer for the often supply-challenged weeks on either side of the New Year, writes the PlasticsExchange. For the third straight month, producers quickly postponed the implementation of their $0.05/lb price increase.

There was relatively little action seen in the propylene arena and prices were slightly softer.

PP trading remained very active and spot prices fell as much as $0.02/lb, perking processor interest for discounted deals. After strong buying in the previous seven to eight months, domestic contract demand seems to have somewhat stalled. This and higher reactor operating rates are contributing to a large upstream inventory build that could total more than 100 million lbs. While the spot PP market is still far less liquid than in years past, production and supplies are improving. We are currently seeing some of the best resin availability of the year, in both bulk railcars and packaged truckloads. After a great run of margin expansion, the upcoming January $0.06/lb price increase might finally be challenged by some headwinds, according to PlasticsExchange analysts.

Read the full Market Update on the PlasticsExchange website.