While solid, commodity resin trading fell short of spectacular last week, and prices remained under pressure, reports the PlasticsExchange (Chicago) in its Market Update.
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Processors were pleased with the Q4 contract price relief, including $0.06/lb for polyethylene (PE) and $0.18/lb for polypropylene (PP), but the mood remained cautious and sentiment has yet to turn back from bearish. Producers have floated a January PE increase to reverse their fortunes, but the PlasticsExchange does not see a lot of traction for an immediate implementation. Still, if energy prices continue to recover and record exports accelerate, we could see an inflection point develop. Overall PP supplies are categorically tight and spot resin often trades at a premium to contracts, so even though PP contracts essentially follow PGP monomer, producers again wish to earn some margin expansion, according to the PlasticsExchange.
Last week's spot PE trading was very good, though activity subsided from the rampant pace experienced in the previous week. Completed volumes reverted back to slightly better than average levels, as processors seem to have covered their urgent needs, but some rail delays and related demand persisted. Resin availability was good, and most commodity products were relatively easy to source.
PE prices dropped $0.01 to 0.02/lb across the board, pushing all of the PlasticsExchange benchmark PE grades to their lowest levels in 10 years. A $0.06/lb price increase is nominated for January contracts, as producers attempt to recoup what was lost during November and December. Although spot and contract prices could deviate from each other, given that the market has continued to weaken even during a traditionally buoyant month like January, PlasticsExchange analysts feel that a timely implementation of the $0.06/lb increase is now unlikely. Export interest has been very strong, as the world recognizes value in North American resin in terms of both price and availability.
PP trading was unable to keep up with the swift pace of the previous week and prices slid another cent. The flow of offers was a bit sporadic, partially caused by a lack of speculative imports since the domestic market nosedived in the fourth quarter. While buyers and sellers repeatedly came to the table, transactions were sometimes hard to complete and often separated by unrealistic price expectations. While there are good deals to be had for railcars, they come and go quickly and are not necessarily repeatable for those slow to pull the trigger. As we see in falling markets, cheaper resin is coming, but buyers tend to want it for immediate truckload shipment, while suppliers with inventory on hand wish to be rewarded for maintaining spot availability, or at least not get punished with a loss.
Read the full Market Update on the PlasticsExchange website.