The spot resin markets were very busy the week ending Aug. 14, according to the PlasticsExchange, with deals well distributed among commodity-grade polyethylene (PE) and polypropylene (PP) resins.
Spot PE prices remained flat with a firm undertone, further consolidating the strong $0.09/lb contract gains achieved over the past couple of months. Spot PP prices regained the penny lost the previous week, as resin availability tightened further. Both PE and PP contracts scored gains in July, and there are active price increase initiatives in play for both resin groups this month, reports the PlasticsExchange in its Market Update. Houston prices have continued to rise, disabling the easy export arbitrage. Plenty of demand is waiting just below current levels, however, if producers feel the need to move surplus material.
Last week’s spot PE market made up for the lackluster start to the month. The flow of offers improved and well-priced bids found quick homes; overall pricing held firm, but notably did not advance. Export buyers have become a bit passive, backing off from the aggressive purchasing that led to the current elevated price levels. Producers’ collective PE inventories currently are at their lowest level since November 2018, with some of them claiming to have no material to sell at any price. Resellers continued to fill in the supply gaps with packaged inventories, but these supplies also seemed to be thinning. Grades such as high-density PE for film and blow molding, low-density and linear-low-density PE, and roto-molding resins were challenging to source. The PlasticsExchange writes that it has not seen spot pricing move up enough to fully support the current $0.05/lb price increase, adding, however, that resin supply/demand fundamentals do skew bullish and producers remain committed to implementation. “The market is by no means teetering, but securing a third price increase in as many months can be a stretch. We still expect to see a new increase announcement for September, which could help hammer home the current nickel,” said the PlasticsExchange. “We have been bullish about PE prices for the past several months and have not changed our outlook.”
PP trading also experienced a very active week, with a high volume of material changing hands and prices adding a cent. Rising monomer costs and force majeure conditions have led to increased spot demand, as buyers secured resin to maintain continuity of supply amid concern that prices would head even higher. Nevertheless, transactions were completed at the PlasticsExchange trading desk in a variety of PP grades, with the exception of low-melt co-polymer PP. Availability was difficult, but not impossible. Material could be found, and although offering prices were higher, sellers were willing to negotiate if there was an order to fill.
At the end of the day, even in a rising market, inventory still needs to be turned into cash flow. PP plant outages and turnarounds have reduced resin production; coupled with strong exports and recovering domestic demand, this generated another large drawdown from producers’ resin inventories, driving collective upstream supplies below one billion pounds for the first time since the PlasticsExchange began tracking such data nearly 20 years ago.
PP contracts remain highly correlated to rising PGP costs; prompt propylene supplies are tight and prices are elevated, driven by planned maintenance at heavy crackers and unexpected extended outages at PDH units. Rapidly rising monomer costs have clipped PP margins, and more producers are getting behind the $0.03/lb contract increase above the change in monomer. Success for these types of increases have been rare in PP, but PlasticsExchange analysts see a good case for it developing.
Read the full Market Update on the PlasticsExchange website.