Weekly resin report: No holiday bargains for PE, PP buyers

After an extended period of weakness, the spot resin markets seem to be transitioning back to higher ground, reports the PlasticsExchange (Chicago) in its Market Update. The deeply discounted offers that were prevalent in late November and early December have mostly been sold, and the flow of fresh resin since has diminished significantly. Polyethylene (PE) and polypropylene (PP) commodity grades recorded the second week of gains as the market begins to recover. Resellers’ inventories have thinned out, as well, and these suppliers have raised the asking prices for their remaining lots. Export demand continues to strengthen, particularly from China; Houston rail lines and packaging facilities remain congested, creating delays. 

PE trading was good, writes the PlasticsExchange, with completed transactions a tad above average and prices rising again. The spot market had been inundated with aggressively priced offers for several weeks, but the season of holiday-priced specials came and went early, and the shelves are starting to look bare. Those processors who assumed that prices would just continue lower were somewhat stunned by the lack of material availability and the higher price levels. PE grades, on average, were up a bit more than a penny, but the gains appeared exaggerated compared to some buyers’ lower expectations. 

Spot PE prices had developed a large discount to contracts, so even as the low end of pricing has been cleaning up, there is still more gap to recover. As such, while there is room for a couple cents to be relieved from December PE contracts, complementing the November $0.03/lb decrease, negotiations are ongoing and the level of change, if any, is still undetermined. In the meantime, competitive offers have generally been met to secure orders; however, a market-wide contract decrease is not a foregone conclusion, according to the PlasticsExchange.

The spot PP market saw sporadic activity—transactions were difficult to complete and hampered by limited resin offers. Buyers had become accustomed to suppliers caving to sell at the ever-dropping bid level, but they began to change their tune and are now seeking material. Not only have PP prices quickly jumped a couple of cents, but not all grades are readily available for immediate shipment. While off-grade HoPP prices had dipped below $0.40/lb during the previous couple of weeks, there was not a PP pellet seen this past week at a price point beginning with a 3. 

The PP market began to firm up a few weeks ago, as rising international levels offered an antidote to anemic domestic pricing. Several subsequent waves of discounted offers came through, but, as the PlasticsExchange pointed out in last week’s report, the quality of the cheap off-grade was declining, as if sellers were scraping the bottom of the proverbial barrel. There was very little generic prime PP offered this past week, indicative of continued reduction in operating rates. If this trend of restricted production and strong exports continues, higher PP prices may be in the offing during the first quarter of 2017. 

Read the full Market Update on the PlasticsExchange website.