Weekly resin report: In a murky contract environment, spot market discounts attract buyers

Rousing itself from a post-Labor-Day slumber, the resin market awoke midweek with solid demand and heavy turnover, reported the PlasticsExchange (Chicago) in its Market Update. The typical order size was larger than usual last week, as some buyers, apparently pleased with the current price level, secured material not only for immediate needs, but also for delivery throughout the next month and sometimes two. 

Image courtesy Cool Design/ freedigitalphotos.net.

Prices were mixed: Polyethylene (PE) ranged from a half-cent lower to a penny higher, while polypropylene (PP) levels slipped a half-cent. Persistent PE producers again are looking to prop up prices, but it remains to be seen if the $0.04/lb increase can gain traction in September. The modest PGP monomer rally has begun to fizzle, which could minimize PP contract movement this month, writes the PlasticsExchange. While resin exports remain robust, a strong U.S. dollar has contributed to weaker prices in China and is challenging sales to Europe. Hurricane Dorian avoided the petrochemical-producing Gulf, but has complicated Southeast logistics. 

The spot PE market eased into September. A short trading week resulted in good volumes, but less than in recent weeks, as buyers struggled to assess a murky contract environment. It has become increasingly difficult to judge contract movements, as even the major consultancies have been reporting different monthly price changes and their price assessments have deviated significantly from the actual prices for physical material in transactions facilitated by the PlasticsExchange. Meanwhile, producers have rolled August contracts flat while reiterating a total of $0.07/lb of price increases spread between September and October, the peak of hurricane season. Contract prices (not including unreported discounts) have remained relatively high, but producers have been generous with their spot discounts, which provide savvy buyers with great deals, and have kept the PlasticsExchange marketplace busy with a steady flow of transactions. 

Spot PE pricing continued to diverge by grade, and premiums have developed for tight low-density (LD) PE film and LDPE and linear-low-density (LLD) PE injection resins, which gained a cent this week, while high-molecular-weight PE and LLDPE film lost another half cent. High-density PE injection and blow molding held steady. The export market continued to be active, but lower prices have been required to move product amid general overall supply, slower worldwide economic activity, trade wars and a strengthening U.S. dollar. Packaging warehouses in Houston remain overbooked and timelines have almost doubled for services. Further logistics delays were caused by Hurricane Dorian, affecting trucking and shipment from secondary ports along the East Coast.

Spot PP trading remained good, but was off its active pace seen over the past two months, according to the PlasticsExchange. The flow of offers was spotty, with less material available after a sales surge in August. Demand was healthy, but some buyers were still hesitant to make a move, perhaps waiting to see how September prices would play out. Heading into the new month, higher PGP prices were indicating a slight contract increase, but spot PGP levels eased this week, removing the upward cost-push pressure. The resin market reacted to the softness as both homo- and co-polymer PP grades gave back the half-cent gained at the end of August. There are turnarounds ahead, which could limit incremental resin supplies, so buyers are advised to plan accordingly.

Read the full Market Update on the PlasticsExchange website.