Spot resin trading remained robust and prices continued to climb sky high last week, reports the PlasticsExchange in its Market Update. Polypropylene (PP) resins tacked on another three cents while polyethylene (PE) prices rose $0.01 to 0.03/lb, depending on grade. Transacted volumes were solid, although they were again restricted by material availability amid force majeure conditions.
The PlasticsExchange trading desk reported fielding a constant flow of resin requests from processors scrambling to procure polyanything to carry them through mid-January. Some left empty-handed, however, and a good portion of demand remained unsatisfied. As resin producers had already booked most of their December business, with incremental export demand remaining and large price increases on the table, very few railcars, Prime or off grade, rolled into the spot market. Most market liquidity was provided by resellers opting to shed some inventory and ring the register before the end of the year, according to the resin clearinghouse. They were only able to sell limited quantities, as prices appear to be heading higher.
Producers will probably implement their $0.05/lb for December contracts and, not surprisingly, many have issued new increases for January. PP contracts will endure a $0.10/lb cost-push increase and probably another $0.03 to 0.05/lb for margin expansion. Unless something happens to severely shock resin or monomer demand, PP prices are expected to continue to rise in January.
Prices on the spot PE trading exchange are leaving many buyers fighting to catch their breath. The PlasticsExchange said that its trading desk was exceptionally busy, as buyers swarmed to the spot market to procure material, but completed transactions only registered a tad above average due to overall lack of availability. Very tight fundamental dynamics have resulted from tremendous demand, both export and domestic; ongoing and new production issues; and a change in market sentiment, as many buyers planned for a break in prices and availability that never materialized. Many resin buyers, initially incredulous, have come to recognize the situation and acted this past week with urgency. They realized that they had misplayed this last surge, while others still could not wrap their heads around rising December prices. Those that floated low-ball bids to the market, hoping to steal a few offers, were mostly ignored, as others readily paid asking prices.
High-density injection and linear-low-density PE film, which had been laggards, gained $0.03/lb while most of the other commodity grades added $0.02/lb. Already premium linear-low-density PE injection and well-supplied high-molecular-weight each only rose a penny.
Although new PE production units have been coming on stream and upstream inventories have built, some of this material is deemed as startup, and much of the bulge is destined to be sold into the growing export market, as planned. The Braskem Idesa feedstock debacle, which shut down a massive PE production facility in Mexico, also added significantly to export demand. The current $0.05/lb increase is looking more and more likely to implement in December, and producers have issued fresh increases for January that range widely from $0.03 to 0.06/lb.
The PP market remained very strong: Extremely tight supply/demand dynamics have been coupled with rapidly rising monomer costs and fresh production issues. This has kept buyers, both resellers and processors, in the spot market scrambling for material, not only to get ahead of additional increases, but also to maintain continuity of supply, according to the PlasticsExchange.
Production woes persisted: Formosa extended its force majeure allocations into January and a fire at Total’s La Porte, TX, facility affected mostly co-polymer production and triggered its own force majeure declaration. As such, there was very little Prime material available and the price jumped another $0.03/lb this past week. Pockets of super-scarce Random Clarified and No Break emerged for a moment and buyers competed to secure them. Although a fairly steady stream of mostly off-grade railcars continued to pelt the market, buyers quickly scooped them up paying equally astonishing prices.
December PGP contracts settled up $0.10/lb, but producers are also seeking a margin expansion. Given market conditions, an additional $0.03 to 0.05/lb increase could implement this month. Spot monomer prices have since continued to rally and suggest that another large increase imminently awaits buyers in January. Happy holidays?
Read the full Market Update on the PlasticsExchange website.