Weekly resin report: Hefty PE price increase on deck for October, but it may not come to pass

The resin markets headed into the end of the month and the end of the third quarter in fine form—general liquidity was good and completed volumes were strong, according to the PlasticsExchange (Chicago). Prices in the spot marketplace varied considerably and, despite emerging bullish signals, overall prices for both polyethylene (PE) and polypropylene (PP) remained pressured.

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Deeply discounted off-grade railcars and good availability of generic prime alternated with instances of PE producers pulling offers off the table as a show of flexing their price-increase muscles, reiterating the $0.11/lb of increases for September and October, reports the PlasticsExchange in its weekly Market Update. Some see potential for the $0.03/lb slated for September to take hold—a major consultancy supported it, but with a hedge—while others voiced skepticism as spot levels languished. Spot PP prices continued soft and September contracts soon should confirm steady to a penny higher. Both PE and PP resin exports have been robust and volumes are expected to continue to grow as additional new capacity comes online. 

Spot PE trading picked up the pace last week as participants, eyeing the end of the quarter, balanced their positions. The flow of deals was above average, according to the PlasticsExchange, and completed railcar volumes outstripped transactions for resin already packaged. Producers discounted aggressively, perhaps shedding enough inventory to confidently close the books on the quarter and affirm the Sept $0.03/lb increase, which is backed up by another $0.08/lb nominated for October. However, most players view the hefty October increase as being placed on record in case a major supply disruption occurs.

Buyers liked the month-end spot discounts, especially in light of the pending increases, and stepped up to the plate with large buy orders in hand. Late in the week, there was a notable attitude adjustment on the part of suppliers, who had many bullish reasons to stand their ground rather than succumb to lower bids from customers. By week’s end, however, energy and monomer markets had also subsided and all spot grades slid a net cent, except for linear-low-density PE film, which stayed flat. As noted in last week’s report, given recent worldwide events, a case can certainly be made for the September increase, but the additional $0.08/lb for October seems unlikely without escalation from the Saudi attacks or another large storm, according to the PlasticsExchange.

Spot PP trading was very strong as September drew to a close. Completed volumes were hefty, supply was ample and most grades could be sourced in both packaged truckload and bulk railcar quantities. Transactable truckloads were favored over railcars, and prime trumped off grade, mostly supplied by traders looking to move excess material. The PlasticsExchange reports seeing a good flow of off-grade railcars, but most were rough and deals were often challenged because of quality. Traders were good buyers last week since not all producers had material to sell, and the PlasticsExchange’s anonymous marketplace provided good access in this fragmented supply chain. While September PP contracts should settle up a cent along with PGP costs, good resin availability remained and supply risks appeared benign, so spot prices for both homo- and co-polymer PP ticked lower, eroding by a full penny by Friday's close.

Read the full Market Update on the PlasticsExchange website.

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