The spot resin markets continued to hum along nicely the week of March 20, reports the PlasticsExchange (Chicago) in its Market Update. There was a good smattering of transactions distributed among the commodity grades of polyethylene (PE) and polypropylene (PP). The flow of offers improved, with better liquidity developing for most materials, though HDPE injection supplies remained remarkably tight. Spot resin prices were mixed: PP lost another penny and PE was either lower, steady or higher depending on the grade. There was both some clarity and further confusion regarding March PE and PP contracts, with additional negotiating likely needed. The strengthening peso should start to aid anemic exports.
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Spot PE trading was consistent: Supplies were a bit better for most materials and prices were mixed. However, demand was still unenthusiastic; processors were mostly buying as needed, as many chose to continue to chew through inventories and limit purchases. PE producers implemented their nickel increase in February and have been working on their March $0.06/lb hike. Upstream resin inventories have been tight, emboldening sellers, while the spot market saw early-month gains, which lent support to the increase. The market then eased mid-month, as exports remained dismal and domestic demand sagged. At that time, and for the past two weeks, the PlasticsExchange suggested that perhaps only $0.03/lb of the increase would take hold.
This past week, a major and influential consultancy expressed that in their view, PE contracts were flat in March. Apparently, not all producers liked that. One major PE producer subsequently reiterated an intent to implement a $0.06/lb increase, with $0.03/lb already in place for March and the next $0.03/lb targeted for April; at least one other producer has echoed the same schedule. Some confusion ensued. The barn door has been opened and some animals have surely fled—maybe the timing could have been more effective if those producers issued those revisions in advance, since there was plenty of time, notes the PlasticsExchange.
Most PP contracts will increase $0.04/lb in March, commensurate with the rise in PGP contracts; this brings the first quarter gains to a massive $0.205/lb. March PGP settled at $0.52/lb, and with average resin contracts running a premium somewhere in the teens over monomer, prime PP railcars should be at least in the mid-$0.60s/lb. This steep and sharp spike should sensibly sap some direct contract demand, which would lead to stronger spot demand as processors tap the lower priced availability. But no, even spot demand simply lacks luster.
Both prime and off-grade PP resin is actually in ample supply in the secondary market, available packaged in warehouses priced between $0.05 and 0.15/lb cheaper than most contracts. Strange, especially during a rally, writes the PlasticsExchange. Sure, forward monomer markets indicate that the industry is currently experiencing peak costs, at least for feedstock, but the discounts are somewhat mild and all the relief might not be passed downstream.
The resin market seems to be headed into a period of softness, but spot does not appear set to tumble, as it is already well-discounted to contracts. The folks at the PlasticsExchange expected better spot buying. Time is ticking, they note, and we will see how long downstream inventories can hold up while processors avoid high-volume purchases at these elevated levels.
Read the full Market Update on the PlasticsExchange website.