Weekly resin report: Markets firm up as Q3 begins

After a period of relative calm, the spot resin markets have begun to heat up, reports the PlasticsExchange (Chicago) in its Market Update.

June ended with a bang, and the fireworks surprisingly continued through the holiday-shortened week. The quarter ended with a hefty purge of material and some nice discounts, but buyers looking for special deals at the start of July found little reciprocation. While there continued to be variance among grades, overall prices for both polyethylene (PE) and polypropylene (PP) have been steady, with perhaps a firming undertone, according to the PlasticsExchange. While there was good domestic demand during the past couple of weeks, incremental resin exports have been hampered by weak oil prices and competitive offers from other regions.

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Monomer markets moved lower as supplies increased. Spot ethylene prices continued to be hammered, eroding another $0.025/lb to $0.1875/lb, a level not seen since the beginning of 2016. The spot propylene market saw back-to-back losses, relinquishing a large chunk of its June gains.

In spot PE trading, a very high volume of material changed hands as June came to an end and the strong demand persisted the first week of this month. Transactions ran across all commodity PE resins, with the bulk of completed deals by the PlasticsExchange involving LDPE and LLDPE film grades. HDPE for injection remains tight and sells quickly when available. HDPE for blowmolding has also recovered from its low point. There were some very sharp one-off deals in mid-June, but the general PE market cleaned up well and even turned firm as the calendar changed.

Although upstream supplies seem adequate and the incremental export market is questionable, most producers have nominated a fresh $0.03/lb price increase for August contracts. This supports the potential for yet another final hurrah for the PE market, as noted by the PlasticsExchange in its previous report. It is too early to call the likelihood of the August increase taking hold, however. So far in 2017, PE contracts are up a net $0.05/lb. A total $0.08/lb of increases were implemented during the first quarter, of which $0.03/lb were then wiped away in May. 

The spot PP market has seen increased activity the past couple of weeks. The low end of pricing has shored up significantly, but prime prices have stalled in their recovery. Without any new resin production slated for the near term and weaker PP prices abroad, the PlasticsExchange said that it is starting to see a moderate increase in PP imports. However, many domestic traders still feel the sting from year-ago imports that went sour, so there is a level of caution with their speculative buys. 

In the meantime, domestic PP supply/demand dynamics remain slightly snug for homopolymer and quite tight for co-polymer, especially in the premium grades. While the July cost-push increase seems to have fizzled upstream amid softer PGP costs, PP producers have come out with a margin-enhancing price increase, as much as $0.05/lb, slated for August. PP contracts are currently up a net $0.07/lb in 2017; they were up $0.205/lb in Q1 and decreased $0.135/lb in Q2.

Read the full Market Update on the PlasticsExchange website.

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