Weekly Resin Report: Demand Rises to Start the Month, and So Does Pricing

A renewed surge in demand in the spot resin markets the first week of May sparked a rise in prices for both polyethylene (PE) and polypropylene (PP). This was a reversal from the latter part of April, when buyers mostly procured minimal volumes expecting the relatively mild easing in prices to pick up steam with additional discounting, reports the PlasticsExchange in its Market Update.

Price levels did slide a bit the previous few weeks, even amid tight supplies, as some air was let out of the top end of the market in response to waning buyer enthusiasm. However, few month-end PE or PP deals materialized as April drew to a close. Market sentiment shifted back into bullish territory, as supplies remained very tight, a new PE force majeure was issued, PGP monomer prices jumped, additional production disruptions were triggered in Mexico, and North American resin producers reiterated their intent to raise PE and PP contract prices further in May. They also nominated new increases for June.

Buy orders stream in for PE resin 

PE producers secured their $0.07 to 0.09/lb increases for April contracts. Even at these very elevated levels, PE demand continued to improve the first week of May while supplies remained just as tight. Processors began to believe that the May $0.05 to 0.06/lb increase could be viable and became more aggressive with their purchases. Buy orders streamed in at a quicker pace. As offers were scooped up, spot prices rose a few cents more, writes the PlasticsExchange. Most producers are still in force majeure with limited allocations of resin for contract buyers. Buyers also started to look for larger volumes of material that would sustain them for longer periods, namely through June. 

Spot PE prices have begun to firm up again. They recouped the late April losses and then tacked on a couple cents more in early May, although there was good variance between grades. High-density (HD) PE injection added the most, rising more than a nickel, helped by the new force majeure. Low-density (LD) PE and linear-low-density (LLD) PE film grades were notably tighter and added a couple of cents. LDPE and LLDPE injection remained very scarce and picked up at least two pennies. High-molecular-weight film and HD blow mold were both flat, respectively, thanks to slightly better availability and already extended pricing from the sharp first quarter rally. 

Notwithstanding material shortages and historically high prices, producers have had no issue maintaining strong PE exports through their direct channels and overseas sales programs, according to the PlasticsExchange. On the other hand, incremental resin exports through brokers and exporters have been challenged by relatively high asking prices, which have limited offshore sales through these secondary channels. Still, some spot exports have been flowing from the United States to other high-priced regions like Latin America and Europe, aided by more favorable ocean rates than material coming from Asia.

Spot PP prices jump at least $0.04/lb

PP trading re-awoke as May began, with spot prices leaping at least $0.04/lb. Demand roared back as PGP monomer prices began to soar again, spurred along by the Colonial Pipeline cyberattack, refinery and PDH issues, and better consumption from resin reactors and monomer exports. While reactors are mostly back and running strong, most producers are still operating under force majeure with reduced allocations of resin in place for contract buyers. Homo-polymer PP availability has been better than co-polymer PP, and while off-grade supplies have improved, Prime PP has remained very scarce and still commands a large premium. April PP contracts saw a nice decrease, even though the $0.13/lb decline in PGP monomer costs was offset by the $0.06/lb margin gain. While some variance is seen by processors and producers, average PP contracts decreased about $0.07/lb for the allocated volumes afforded by force majeure conditions. The imminent May PP contract increase will be larger than the April decrease, notes the PlasticsExchange. 

PP imports were very heavy during the first quarter, but new purchases slowed dramatically in April as international prices rose and ocean freight rates skyrocketed because of displaced containers and insufficient ship space. Moreover, as PP sentiment was weakening, importers lost much of their arbitrage incentive, especially when faced with long logistics delays and the fear of falling PP prices once the resin arrived. This lack of new import orders in April will impact overall PP supplies, but also will be somewhat offset by late arrivals, as many shipments intended to reach the US shores in March/April, will finally arrive in May/June. With US PP prices heading higher again, there was another round of PP import purchases made in the beginning of May with deliveries targeted throughout June.

Read the full Market Update on the PlasticsExchange website.