Weekly resin report: PE up a penny; PP drops in spot trading

Spot resin trading remained healthy as November rolled in, although it did not maintain the rapid pace of the previous few weeks, writes the PlasticsExchange (Chicago) in its Market Update. Some buyers took advantage of special month-end deals; then, toward the end of the week, a drop in fresh railcar offers helped earn commodity polyethylene (PE) grades a penny gain on Friday, Nov. 2. Polypropylene (PP) offers continued to flow and spot values fell a hefty $0.03/lb. While the PP market is far from awash in resin, rapidly eroding PGP costs point to a sharply lower contract settlement for November monomer.

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There are also price increases on the table for November resin contracts, with producers generally seeking to add $0.03/lb to PE contract levels. At least a couple of PP producers are looking to expand margins by $0.02 to 0.03/lb; in other words, they don’t want resin prices to precisely match the decrease in their monomer costs.

Spot PE trading was solid, if not quite the heavy turnover seen over the past several weeks. Linear-low-density (LLD) PE and low-density (LD) PE film grades, as well as high-density (HD) injection, continued to shine, as pockets of low-priced offers quickly came and went. Although November began with less buyer enthusiasm, the PlasticsExchange expects good transactional volumes to resume. Suppliers were also quieter toward the end of the week, and the lack of offers earned a penny gain across all commodity-grade PE resins.

Spot prices have lifted $0.01 to 0.03/lb from this cycle’s low point, which has helped to shrink the gap between elevated contract pricing and the deeply discounted spot market. October contracts had rolled flat and producers will give their average $0.03/lb increase another try in November. While implementation might be a tall order at this time, the nomination could help hold the contract market steady, rather than give up a decrease, according to the PlasticsExchange.

On the bear side, sharply lower crude oil pricing, which is top of the feedstock chain for much of international PE production, has started to sap export demand. If oil continues to fall and bearish sentiment accelerates worldwide, export demand and pricing could soften and generate another wave of lower priced offers.

Spot PP trading was a bit slower; eyeing plummeting feedstock costs, buyers have backed away from the market or at least reduced purchase volumes. Material availability increased for both homo-polymer and co-polymer PP and prices stepped lower during the week, ending down a large $0.03/lb.

In a world of instant gratification, some buyers are already expecting the potential dime decrease in November PGP monomer contracts to instantly and fully transfer downstream in the form of much cheaper PP resin prices. However, PP supply and demand is relatively well-balanced and few suppliers appear to be caught with burdensome amounts of uncommitted material. Indeed, there is some lower priced resin already entering the marketplace. Buyers that need PP resin delivered in the near future, however, should expect only modest price relief. PP producers seem to be looking at the cost decrease as an opportunity to expand margins by lowering resin prices a few cents less than the drop in monomer costs. As long as it is substantial, few buyers will complain that the price relief is not enough.

Read the full Market Update on the PlasticsExchange website.

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