Weekly resin report: Harvey sends PE, PP prices skyrocketing

The spot resin markets were extremely busy last week. The PlasticsExchange (Chicago) reports in its Market Update that its trading desk transacted the highest completed volume of the year, while both polyethylene (PE) and polypropylene (PP) prices skyrocketed. The limited availability of resin caused constant re-pricing across the board, with daily PE and PP upticks occurring on several occasions. “Trading was not easy,” writes the PlasticsExchange in its update, “and offering resin at rapidly rising levels was, indeed, uncomfortable.”

Lost production from the eight major commodity resin units taken off line has triggered force majeure declarations on PE and PP resins. (Check out Petrochem Wire for full coverage of Harvey and its devastating aftermath, including specific plant details.) Although many resin-related roads and rail lines remained flooded, by Friday the majority of Houston area warehouses began to operate and load outgoing shipments with limited capacity. 

Resin was very hard to come by in the immediate aftermath of Hurricane Harvey, especially in the early part of the week, as producers made no offers while distributors and resellers generally restricted resin sales from their inventories pending assessment of the storm damage. Material that was offered usually transacted immediately or was otherwise unavailable when circling back to confirm. 

Amid these challenging times, the PlasticsExchange commends the members of the resin industry for their expressions of humanity. “There has been more concern placed on peoples’ welfare and continuity of supply for critical businesses rather than an effort to profiteer or gouge,” writes the PlasticsExchange. That said, it also recognizes resellers’ investment, risk and fortuitous positions and feels they are entitled to the commensurate benefit from their on-hand inventory, especially considering the likelihood of reduced fresh material availability ahead to generate needed revenues. 

According to Petrochem Wire, whose 49 updates have provided the industry’s most complete and timely coverage of the storm, approximately 80% of all Texas ethylene production, representing about 100 million pounds of daily ethylene output, had been taken off line because of the storm. From Aug. 24 to Sept. 4, approximately one billion pounds of production has been lost. That was also largely offset by lost demand from the consuming downstream reactors, which have also been off line. 

The Labor Day holiday has provided an extended non-commercial weekend for petrochemical producers to work diligently to bring their storm-shut facilities back online. As of this writing, several complexes, including refineries, crackers and reactors, were either in restart mode or back operating at limited rates, notes the PlasticsExchange. 

In stark contrast to the hyperactive resin markets, monomer trading activity was eerily quiet, as market participants assessed the hurricane damage and dealt with cleanup issues. It will take a little time for some to determine their monomer needs, largely based on the timing of supply chain assets returning on line. 

Most monomer market participants appear to have been on the sidelines, with transactions really only developing late in the week. Ethylene for September delivery was last seen trading Friday at $0.295/lb, up $0.035/lb. Propylene activity also began to emerge late in the week and pricing firmed a little to $0.41/lb. With asking prices quoted quite a bit higher, there is a realistic potential for an upward run in PGP prices. The PlasticsExchange anticipates a more fluid market developing as future days come to pass. 

Read the full Market Update on the PlasticsExchange website.