Last week’s spot resin trading was sporadic, with intermittent periods of quiet mixed in with spurts of aggressive activity, according to the PlasticsExchange (Chicago). The flow of fresh railcars was a little lighter, though some resellers also sought to unload their uncommitted warehoused stocks, which aided market liquidity, writes the resin clearinghouse in its Market Update.
|Image courtesy Cool Design/
Polyethylene (PE) prices remained steady for the second week in a row; spot levels have lifted between $0.005 and 0.02/lb above this cycle low, which occurred about a month ago. Polypropylene (PP) offers continued to pelt the market, and some suppliers seeking sales reduced railcar asking prices, seemingly just trimming margins to spur demand. It was enough pressure to shave another half-cent from both homo- and co-polymer PP levels. Despite a price increase on the table, PE contracts should roll flat at best; PP contracts will decrease in-line with the decline in PGP monomer, currently estimated at $0.03/lb.
Spot PE trading picked up steam as the week moved along, finishing with a flourish of activity on Friday, notes the PlasticsExchange. Spot market activity came in waves, in line with much of what has been seen so far in 2019; despite these ebbs and flows, completed volumes were surprisingly high last week. The PlasticsExchange’s official PE prices did not see change during the week, although sellers’ asking prices generally began higher before being whittled back down to familiar levels to enable transactions. Processors continue to tap the spot market for relative deals, some minimizing their contract purchases, which, to some, remain frustratingly high. At this juncture, the PlasticsExchange does not feel that the current $0.03/lb price increase warrants implementation.
Overall domestic PE demand was soft in February, down about 5% from the trailing 12-month average, though export sales continued to pick up the slack, running a solid 1.25 billion pounds, representing 32.5% of total sales. These preliminary results, which tend to revise, also indicated that production issues and maintenance impacted PE production, which pulled back to the lowest level in a year. This led to a sizable draw from producers’ collective inventories, the first since October. While supply/demand fundamentals are improving, they have not had much of an impact on spot prices, which remain well discounted to general contract levels.
PP trading eased back from its recent heightened pace, reverting back to a more normal, if not lackluster, level. While offers were consistent, demand was lax, and enthusiastic sellers shaved prices to gain orders, resulting in a half-cent decline in both homo- and co-polymer PP. Preliminary results indicated that PP demand was soft in February, the weakest since last February, which is historically a seasonally slow month for PP, before stronger demand kicks back in.
Reduced production contributed to a moderate draw in upstream PP inventories, the first since October. PlasticsExchange analysts expect March PP contracts to decrease about $0.03/lb along with the anticipated drop in monomer contracts. Unless the entire PGP forward curve readjusts lower, PGP prices are now forecast to begin a long and slow uptrend, which will at least be matched by PP.
Read the full Market Update on the PlasticsExchange website.