The spotty reopening of the larger economy has trickled down to the spot resin market, as buyers began to return in anticipation of firing up processing facilities that had been shuttered. The supply situation has also tightened significantly: Producers have reduced reactor rates, slowing their resin output while aggressively liquidating surplus resin to eager international buyers, mostly in the far east, reports the PlasticsExchange in its Market Update. Recovering crude oil and feedstock costs also contributed to improved market sentiment and together translated to a $0.01/lb spot increase for most commodity-grade polyethylene (PE) and polypropylene (PP) resins last week. It was a small, yet meaningful, uptick compared to the much larger decline seen over the past couple of months. But market cycles can sometimes change in a heartbeat and it’s indeed possible that we have hit at least a temporary bottom, according to the resin clearinghouse based in Chicago.
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After ceding a $0.04/lb contract decrease for April PE contracts, rumblings were heard that price increase letters were in the works for June. April PP contracts decreased $0.02/lb and seemed to be heading lower in May, but now-recovering propylene monomer costs could wipe away the additional relief. Stay tuned — this market is very volatile.
Spot PE activity increased as some shuttered businesses came back online and processors started looking for material. After a super-slow and somewhat surreal period, the market might have turned the corner and it started to resemble the pre-COVID pace, writes the PlasticsExchange. While sentiment improved, completed volumes still fell short of the trading desk’s first-quarter average. There continued to be a heavy focus on truckload quantities rather than railcar purchases, as buyers mostly remained in conservative mode. Resin availability was tighter, much more so than many expected, since producers slowed their new production significantly while also moving large quantities of material into the export abyss as their international naphtha-based counterparts face rising/recovering feedstock costs. Resellers have also been working down their inventories, which has left liquidity holes for some grades requiring immediate shipment. Of course, material can be found for buyers who are willing to sweeten the pot.
Spot prices moved up a penny this past week except for LD Clarity, which has been shedding some of the large premium it had developed to other film grades. Processors received a $0.04/lb decrease for their April purchases; while buyers are seeking another discount in May, so far producers are holding their ground. Upcoming spot market activity and pricing could be the tell-tale key to determine which direction contracts will lean, according to the PlasticsExchange.
There was a bump in demand in spot PP trading, as various stay-at-home orders eased and more manufacturing returned back online. Of the completed orders at the PlasticsExchange last week, co-polymer sold more than homo-polymer PP; prime moved more than wide spec; and truckloads were favored over railcars. Improved demand coupled with recovering energy and feedstock costs translated to a $0.01/lb rise in prime homo- and co-polymer PP prices, regaining early-April levels. However, off-grade prices remained soft and well-discounted railcar offers carried over past month-end.
April PP contracts were mostly down $0.02/lb and even though there have been efforts to de-couple resin from monomer, May levels are likely to adjust based on the PGP settlement, which has been the case for years. At the moment, minimal price change would be in order, but we are still in the first half of May and the situation remains fluid.
Read the full Market Update on the PlasticsExchange website.