The spot resin markets ushered in December with a bang—order flow from both buyers and sellers was moderate to heavy, reports the PlasticsExchange (Chicago) in its Market Update. Spot prices for select commodity grades continued to slide, and most realistic transactions came to completion with relative ease.
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The market is expected to slow, however, during the latter part of this month. An ongoing de-stocking effort is taking place in the reseller and processor sectors, as resin prices fall, creating strong demand for spot material that often triggers the need for urgent shipments. Polyethylene (PE) and polypropylene (PP) contracts both lost around $0.03/lb in November; the PlasticsExchange expects PE contracts to manage steady in December, while PP contracts are likely to see further erosion this month. The export market remained busy and transacted volumes were high.
Spot PE trading maintained the strong momentum that developed during the final week of November, and completed volumes continued to run above average, according to the PlasticsExchange. Pricing for all low-density and linear-low-density PE grades, both film and injection, was flat to firm; however, high-density grades shed a cent. The PlasticsExchange reports that its trading desk was kept busy filling orders, the majority of which were actually booked to other distributors, resellers and exporters rather than processors. This was not super surprising as fellow suppliers have been thinning their inventories, perhaps preparing to procure sizable volumes if super special deals are presented near year-end. In the meantime, there has been a serious run on spot truckloads (even five or 10 at a time) to fill in supply gaps and keep processing customers amply supplied with material. This has created a premium for ready-to-ship truckloads, even as fresh shippable railcars are generally discounted.
The PE contract market seems to have accepted a $0.03/lb decrease in November, although there is not necessarily industry-wide consensus. The decrease prompted some market participants to ask for an immediate and equal discount for spot material, so it is important to note that spot prices often change daily and this particular price reduction has already made its way into the market and then some, writes the PlasticsExchange in its weekly update. In fact, the discount that spot has developed to contracts and consultants’ indices has widened greatly during 2019. Transactional prices have steadily deteriorated, while contracts have netted out shockingly flat after gaining and losing 3 cents twice this year. The export market remains very healthy and has continued to grow, making new all-time volume records as different regions continue to tap North American supply as a source of ultra-competitively priced material.
Spot PP trading started the month swiftly. Transactions were split between homo- and co-polymer PP, while prime demand outstripped off grade and quick truckload shipments were favored over fresh railcar orders. Similar to what happened with PE, resellers brought the best demand to the PlasticsExchange marketplace and their needs were met with liquid material availability. Most reasonable transactions fell into place without the need to negotiate fiercely. The middle and downstream segments have been limiting purchases as they eye lower pricing ahead and are willing to pay fair market value to maintain continuity of supply. Prime PP prices peeled off another cent, as upstream monomer costs fell further, pointing to another contract decrease to finish off the year.
Read the full Market Update on the PlasticsExchange website.