Weekly resin report: Lackluster demand opens gap between buyer and seller price expectations

The spot resin markets were a bit challenging this past week, reports the PlasticsExchange (Chicago) in its Market Update. Both polyethylene (PE) and polypropylene (PP) supplies were generally snug and prices continued to press higher. However, demand has also been surprisingly lackluster, leaving a wide spread between buyer and seller price expectations. 

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PE producers are implementing their $0.05/lb increase for February contracts; most, if not all, have backed the increase with another $0.06/lb slated for March. PP producers are looking to pass through their higher PGP monomer costs onto February resin contracts, generating steep back-to-back monthly increases that will total around $0.18/lb. 

Spot PE trading was difficult, according to the PlasticsExchange: Asking prices usually came in too high, but were generally negotiable. Buyers, especially those with enough material on hand, were sometimes just checking levels, perhaps gauging the likelihood of the current price increase. Those processors truly in need of material bit the bullet. PE prices gained as much as $0.015/lb, but some grades like LDPE for film, which had been steadily advancing, held flat this week. Overall PE supplies remained snug—while there was better liquidity spread among grades, none would be considered abundant. 

PE exports were reduced in January and remain constrained due to rising U.S. prices and logistics limitations. After a blowout December, total pounds shipping offshore in 2017 has since slipped below the 2016 average. Although producers have been running reactors at around 95% of capacity, upstream inventories were reduced again, beginning in February, with about 200 million pounds below the 2016 average. Domestic demand surged last month, running almost 8% above the 2016 average, as processors padded their inventories ahead of the February $0.05/lb price increase, which is firmly taking hold. 

Spot PP prices continued to rise. Packaged supplies were still sparse and, while some off-grade railcars were flowing, generic prime cars were again absent from the secondary market. Although both buyer and seller order flow has been sporadic, transactions are becoming easier as sticker shock subsides. Processors have quickly become re-acquainted to off-grade prices in the $0.50/lb range with prime sometimes piercing above $0.60/lb. 

PGP monomer prices stalled after their fast and furious ascent from $0.30/lb to the $0.46 to 0.48/lb range. After passing through a dime in January, PP producers are looking to implement another $0.08/lb or so increase in February to fully recover their two-month rise in costs. Although the PP price spike is tough to swallow, supply/demand dynamics seem to be lending support, notes the PlasticsExchange. With the increase writing clearly on the wall, domestic PP demand in January jumped 5% above the 2016 average, though downstream inventories are still light. Soaring PP prices shut down the export surge, which peaked in December and helped to offset the domestic bump. Still, collectively, PP producers have their lowest inventories in at least 10 years, and, yes, PP imports are heading this way.

Read the full Market Update on the PlasticsExchange website.

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