Activity was muted in the spot resin markets during the Labor Day–shortened week, reports the PlasticsExchange (Chicago) in its Market Update. Resin trading was a little slow to restart, but action rebounded in the second part of the week, registering solid performance in terms of volume.
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Spot demand was a little stronger for polyethylene (PE) than polypropylene (PP), but neither commodity resin group saw much in the way of price fluctuations this past week. Exporters remain cautious in light of burdensome Chinese tariffs and are curious if producers will support the traditional export channels with discounted prices or simply sell more material directly, even at a lower number, which seems to be the trend. Of course, there is a $0.03/lb price increase on the table for September PE contracts; PP contracts, which are well balanced, are likely to follow the direction of PGP, which added approximately a half-cent for September, with forward months gaining even more.
Spot PE activity was very good despite the holiday-shortened week and completed volumes were a tad above average, according to the PlasticsExchange. The flow of offers was lighter, which is typical for the first week of a month, and most PE grades were steady or gave back the half-cent gain seen in the previous week. Much to the delight of producers, a major consultancy revised its index to flat for August instead of down $0.03/lb, as initially suggested. Regardless, spot PE still fell about $0.03/lb in August and remains well discounted to contracts. Buyers are increasingly finding value at these lower levels, adding to spot demand and trading activity. Despite added PE capacity and production, producers will again attempt to implement their $0.03/lb increase for September contracts. The PlasticsExchange believes that keeping an increase on the table is wise—considering the active trade wars, geopolitical tensions (Iran) and tropical storms/hurricanes threatening the Gulf, an upside surprise could come to fruition.
Spot PP trading was slower, as the flow of offers eased and completed volumes slipped below average. There were fewer buyer inquiries, and most transactions conducted by the PlasticsExchange were for homopolymer rather than copolymer resins. Foreign traders were eager to offer material in the U.S. market, but traders were apprehensive to secure material 45 to 60 days out without orders in hand. The overall market is fairly well balanced between supply and demand, so any fresh production hiccups could re-tighten the market as we enter a traditional period of heightened demand. Based on current spot levels, September PGP and PP contracts likely will see little change. However, the PlasticsExchange recommends maintaining ample inventories as potentially disruptive weather systems heat up in the Gulf.
Read the full Market Update on the PlasticsExchange website.