Weekly resin report: No June gloom in spot resin markets

Spot resin sales were swift last week, with a healthy flow of both bids and offers, which generated an above average number of completed transactions, reports the PlasticsExchange (Chicago) in its Market Update. Volumes were skewed toward polyethylene (PE) and particularly film grades, where spot pricing was considered favorable, especially for higher end materials, which have seen their wide premiums erode. Several commodity grades of PE continued lower, while polyethylene (PP) prices were steady to firm along with monomer. Despite the weakening value of the U.S. dollar and falling resin prices, the PlasticsExchange notes that it has seen an extended lull in incremental exports. 

Polyethylene trading was very good, even as market sentiment shifted a bit more into negative territory. LDPE and LLDPE resins all dropped another penny, while HDPE fractional melt resins, which have already been pummeled, held steady. HDPE injection gained yet another cent amid unprecedented scarcity, which is starting to show early signs of improved supply. Most other PE grades have been amply available; even though producers collectively built over 500 million pounds of inventory these past three months, the market does not feel overly flooded with resin. 

PE buyers are looking to ride the market’s bearish momentum by leveraging the May $0.03/lb contract decrease for further price relief in June, according to the PlasticsExchange. In the meantime, contracts are still up a net nickel for 2017. Considering the most upstream inventory since February 2016, a large delta between Houston and domestic PE levels, and the lack of upward pricing pressure or even cohesive support, further price declines are indeed possible. 

Spot PP trading was considered fair, fine or okay, but certainly not active, great or robust! Minimal offerings of prime domestic railcars and limited prime warehoused stocks from the reseller community were observed, which together provided support to prime pricing. However, off-grade levels remain relatively soft due to the steady-to-strong stream of wide-spec material targeting both the domestic and export markets. 

Renewed domestic demand and some restocking in May bumped PP sales 6.5% higher than the trailing 12-month average. This contributed to the second consecutive upstream inventory draw, tightening producers’ collective resin supplies to just below average. Tightening supplies and firming monomer levels helped stem the slide in spot PP prices and even generate a few upticks. However, volatile feedstocks have simply been pushed along to resin contracts, which have reverted to a very close correlation to monomer, and will likely just follow their lead again in June. Based on current PGP levels, the PlasticsExchange expects PP contracts to add a penny or so in June. 

Read the full Market Update on the PlasticsExchange website.