The resin markets were pushed and pulled by opposing supply/demand forces last week, which set a very nervous tone. Market participants took a big step back as another wave of coronavirus news shocked the stock market with fears it might trigger an economic slowdown. That sent many commodity markets, upstream energies included, into a downward tailspin, reports the Chicago-based PlasticsExchange in its Market Update. But what about commodity grade resins? Interestingly enough, North American plastics prices have held up amazingly well and saw mixed results last week.
|Image courtesy Cool Design/
Polypropylene (PP) prices actually achieved gains, as supplies generally remained tight — recent upward market momentum could still lead to implementation of the $0.03 to 0.04/lb margin increase slated for March. Polyethylene (PE) levels were steady to mostly lower, though some materials such as low-density (LD) PE Clarity and linear-low-density (LLD) PE injection remained outright scarce. There is another $0.04/lb PE increase on the table for March. Despite manufacturing shutdowns in China, a key export destination, the PlasticsExchange reports that it has not (yet) seen a slug of material re-offered into the spot market.
PE trading was good, but not great. The mood was dreary, as many market participants watched an equity and commodity markets meltdown amid fears that the coronavirus could cause a global slowdown. This seemingly sent processors to the sidelines to reevaluate their upcoming purchases and inventory levels. Despite distractions, deal after deal came together to make for a very solid February, according to the PlasticsExchange. Although resin availability was expected to loosen up, as is typical during the last week of the month, supply remained tight for most grades. Still, shaky sentiment got the best of the PE market, clipping the wings of the fledgling bull cycle that was starting to fly.
Spot PE prices averaged down a cent this past week. LD Clarity was the strongest and held steady, while LLDPE film was the weakest, down a large $0.02/lb; all other grades were somewhere in between. The February contract market appears to be flat for all grades except for LDPE, which seems to be adding $0.02/lb on the back of tight supplies and is supported by strong spot pricing. Another $0.04/lb increase is on the table for all PE grades in March, but given recent developments, producers might be happy just to hang on to the $0.04/lb hike achieved in January.
PP trading was about average, with deals being more difficult to complete than in recent weeks. Transactable railcars and truckloads of co-polymer PP were very difficult to come by; homo-polymer PP availability was slightly better, but not by much. Supply remained very tight caused by reduced production related to both planned maintenance and unexpected outages. This was somewhat offset by slower demand largely attributed to general uncertainty surrounding coronavirus fears. Resellers were more active buyers than processors, and off-grade was more sought for savings over soaring asking prices for Prime.
The PlasticsExchange noted in its Market Update that it continued to see divergence between PGP and PP prices, as scarce PP availability is sending prices higher despite rapidly eroding energy prices and falling monomer costs. (The major energy markets suffered one of the worst single week declines in recent memory last week.) This dynamic makes sense, as limited resin production has been unable to consume the growing glut of monomer, weighing on this feedstock cost. PP producers are seeking a price increase of $0.03 to 0.04/lb above the change in March PGP contracts. Implementation is now leaning toward likely, given spot-market momentum and historically light inventories at the producer level. It’s also worth remembering that PP margin increases have been very hard to secure in the past.
Read the full Market Update on the PlasticsExchange website.