The spot resin markets remained extraordinarily active last week, as prices continued to climb amid scarce supplies, escalating energy and feedstock costs, and an unprecedented winter storm barreling toward the Gulf Coast.
Polyethylene (PE) prices added another $0.01 to 0.02/lb, paving the way for implementation of the February $0.07/lb increase, reports the PlasticsExchange in its Market Update. That would bring the total tally to $0.36/lb since June. Yet another $0.07/lb PE increase has been nominated for March and is already being given serious consideration. While the soaring PE prices are nothing to sneeze at, they pale in comparison to the $0.11/lb spot gains that polypropylene (PP) resins recorded this past week and the $0.75/lb run-up since bottoming out last spring. Seemingly more upside is still ahead. Given the massive cost-push pressures from PGP monomer along with insufficient resin supplies, February could record the largest PP price increase in a single month.
A polar vortex carrying an Arctic blast with record low temperatures has been making its way toward the very same area along the Texas/Louisiana border that was devastated by hurricanes this past fall. The normally warm petrochemicals-laden region is ill-prepared to withstand freezing temperatures and sheets of ice, which could affect critical refineries, pipelines, steam crackers, resin reactor systems, the power grid, import/export terminals, and overall area logistics, notes the PlasticsExchange. The resin supply/demand dynamic is already so incredibly tight that even as prices have soared, numerous processors are eyeing shut-down situations caused by a lack of resin to run. This resin market is in no condition to endure additional supply shortages, and a significant production disruption could send resin prices to new record-high levels, reports the PlasticsExchange.
In this environment where availability trumps price, completed volumes at the PlasticsExchange trading desk have soared, as buyers swarm to the spot market. Key suppliers have continued to provide the resin clearinghouse with a good flow of material, albeit at ever-rising prices, to help maintain liquidity in the spot resin market. As it approached mid-month, the trading desk has already blown past its record January performance, as buyers scramble to secure resin to maintain continuity of supply, reports the PlasticsExchange. Buyers have become more liberal with their resin needs, too. Branded Prime buyers have generally been accepting Generic Prime if the application supports it, while other Prime buyers making non-critical products have opened their spec to receive off-grade materials. Railcar buyers are taking in truckloads, both bulk and in boxes, and even 25-kg bags are now coming into high fashion, according to the PlasticsExchange.
With very little replacement material to be had in the secondary market, resellers are selectively doling out material mostly to loyal customers and new opportunities that could become long-term relationships. PE supplies remain incredibly tight. High-density (HD) PE blow molding grades command strong premiums to other HDPE resins, such as for injection and film, which happen also to be scarce. Linear-low-density (LLD) PE high-flow resins for injection and compounding are hard to come by at any price. LLDPE film grades are super snug, but can be found if one pays up. Spot supplies of LDPE film grades from frack to high clarity have been whittled away, but some are still available. Latin America remains the strongest export bid, and buyers are actively competing with US processors for incremental material.
PP resins are categorically tight. While there has been a somewhat steady flow of spot material, it comes and goes in a heartbeat, according to the PlasticsExchange. Co-polymer PP High Flow and NB, homo-polymer PP Raffia and PP Random Clarified are the most sought materials. Multiple buyers generally pursue each lot, and when material sells, the next offering price comes in higher, writes the PlasticsExchange in the report. Volatility is on the rise: In a market that usually moves in penny increments, nickel and dime moves are becoming commonplace. Many buyers have walked away as profitability is squeezed. So far, though, the resilient volume of in-elastic demand has yet to be satisfied even as prices escalate into uncharted territory.
Read the full Market Update on the PlasticsExchange website.