Spot resin trading continued to hum along at a healthy pace last week, with transacted volumes again skewing toward polyethylene (PE) over polypropylene (PP), reports the PlasticsExchange (Chicago) in its Market Update.
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The flow of offers for both groups of resins slowed, particularly for CoPP, which has become notably tight, leaving unmet demand in this market segment. Spot PE prices were steady to lower depending on grade, as premiums between the key commodities settle back into more historic levels. Producers are largely looking at August as an opportunity to raise domestic PE contracts by $0.03/lb. PP producers also have their eye on a $0.03-0.05/lb increase slated for August. Export markets in general picked up a bit, with better demand coming from Mexico.
Spot PE trading was very good and completed transactions remained above average. Spot sales were well distributed among the commodity grades with the exception of HDPE for injection, amid still tight supplies. Some offers emerged, but they were priced beyond what even buyers in seemingly desperate need were willing to pay. Despite a shortage of HD Inj resin, resellers are only seeking back-to-back transactions at this time for fear of the huge premiums one day evaporating. The PlasticsExchange notes strong spot buying for LDPE film resins, where premiums continue to erode. That has prompted some buyers, both resellers and processors, to take added positions based on relative value. While some spot price movement between grades is not unusual, the inter-market volatility during 2017 has been extraordinary because of supply and demand dynamics, according to the PlasticsExchange.
The last PE contract price movement was an across-the-board $0.03/lb decrease in May (after $0.08/lb of first-quarter increases). It was a curious decrease for HDPE for injection, which was very tight; spot prices were visibly rising sharply and exceeded contract levels. It is rare to see a split contract increase/decrease between products, but if ever there was an appropriate time, the May HDPE Inj decrease was out of place, wrote the PlasticsExchange in its report. HDPE Inj remains a large premium, and while the timing might now be over-ripe with another increase in play, there is a possibility that HD Inj will officially deviate from the other PE materials, especially if HD producers feel that the shortage will continue.
While there was a good flow of buyer requests, completed PP volumes fell short this past week. Processors’ HoPP inquiries appeared to be mostly window shopping, since material was generally available to cover orders and actual POs were hard to pry. Consequently, off-grade HoPP levels were a little softer, though prime railcar pricing held fully firm. The opposite was true for CoPP resins, where a good number of POs were in hand, but well-priced material was generally unavailable to fill the majority of the orders. Resellers had little surplus CoPP on hand to satisfy truckload needs, and while some railcars were shown, they sometimes came and went too quickly.
PGP monomer costs have been relatively stable in the mid to higher $0.30/lb, while PP resin supply/demand dynamics have been tightening. The PP market seems to be setting up for the first margin-enhancing price increase in more than a year. The wildcard could be PGP supply; if all PDH units can remain up and running, monomer might see another leg lower and resin prices might just fall less. Otherwise, the PlasticsExchange sees a good chance that a stable or firming monomer market would help push PP prices higher in August and September.
Read the full Market Update on the PlasticsExchange website.