Weekly resin report: Great PP procurement opportunities abound for processors

Lets’ get busy! That has been a clarion call at the PlasticsExchange (Chicago), which has been hoping to see spot resin trading ratchet up for some time now. It finally happened last week. In fact, it has been a while since we’ve seen this level of activity, writes the resins clearinghouse in its weekly Market Update.

Polyethylene (PE) demand was solid with prices holding steady, though LDPE posted another penny gain. Polypropylene (PP) demand was relatively good, but at times inconsistent; off-grade pricing remained weak, and prime gave back some recent gains. Export interest from Europe has waned a bit, Latin America is average to good and, while Asian pricing has advanced a bit, it is still discounted to U.S. levels.

The PE market is finally back from summer vacation. The PlasticsExchange trading desk reports fielding a steady flow of orders practically across the entire slate of PE products. Overall demand has been fairly solid, even while lower prices were expected and it seems that many processors are still short of material. Continued production issues caused by planned and unexpected outages have limited supplies of most LDPE and LLDPE grades, dashing hopes for contract price relief in July.

On the other hand, HDPE for all blowmolding, injection and film processes are readily available, at least in limited quantities. That has resulted in a little weakness in pricing, particularly for off-grade and prime for export. LDPE and LLDPE, both film and injection grades, have been very snug, with a slight improvement in availability. However, spot railcars are quickly placed just as they trickle in, as it seems that some traders are still out covering old orders where their supply had failed to materialize.

Processor requests have generally begun with lower price ideas, but transactions have been concluding at steady to higher levels, as their competitive offers have not been substantiated. Domestic prime PE prices have found some strength, as July contracts are likely to roll flat and the spot market recovers the little discount that it had developed. Sorry, processors, but there is always August . . . .

Spot PP trading has been erratic. There were good spurts of demand when the market began to tighten up, reports the PlasticsExchange, but buyers scattered quickly with any signs of price weakness. The PP market came down hard from March to May and seemed to stabilize in June, when processors stepped up to the plate and took a good swing as prices were just too good to resist. However, the PP market appears to be taking another dip lower amid another wave of supply that cannot seem to clear.

The flood of imports earlier this year that turned the market from tight to loose seemed to be concentrated in copolymer materials. The more recent oversupply has been from domestic homopolymer production. As the overall bearish market languishes, those importers that tried to wait out the trough have begun liquidating unsold inventories that they had previously just tucked away, and packaged copo is now nearly as plentiful as homo. This seems to be limiting a quick rebound.

We still recognize that PP prices in the $0.40 to 0.50/lb range are a tremendous value on a historic basis. In time, we believe these levels will again look very cheap and the industry will view this period as a great procurement opportunity.

Read the full Market Update on the PlasticsExchange website.