Weekly resin report: PE, PP costs jump

Spot resin trading picked up the pace the week of March 14, reports the PlasticsExchange (Chicago) in its weekly market update, as purchasing activity increased and polyethylene (PE) and polypropylene (PP) prices jumped $0.01 to 0.02/lb. Energy and feedstock prices continued to recover, and ethylene and propylene monomer costs also soared, now both above $0.30/lb, substantiating the gains seen in downstream resin markets.

The PE market is seeing a turn in key fundamentals, creating an increasingly bullish shift in sentiment. Crude oil prices have quickly popped about 50%, supporting international naphtha-based PE, just as cracker turnarounds in both Asia and the United States limit ethylene supplies, driving both resin costs and prices higher.

PE demand was high, with processors aggressively looking for material, but supplies dried up quickly, reports the PlasticsExchange. Trading partners across the reseller spectrum all reported swift sales, and as their prevailing offers were purchased, they were replaced by fewer pounds at higher prices. Exporters are experiencing another good surge in demand. Aside from solid volumes to Latin America and Asia, the strengthening euro currency is aiding the resin arbitrage to Europe.

Prime and even most off-grade PE priced in the $0.40/lb range can now only be seen in the rear-view mirror. HDPE for film, blowmolding and injection molding are now all in the low to mid $0.50/lb range and becoming difficult to source. LLDPE film grades are in the mid to high $0.50/lb range, and prices for LDPE Clarity, which is outright scarce, are generally starting with a 6.

The seven-month bear market in PE seems to have ended. The low end of the market has substantially cleaned up and sharp spot discounts have been eliminated. Some buyers are wishing they had stocked up more when prices were near the bottom, but still recognize that PE is very affordable on a historical basis, writes the PlasticsExchange.

However, the tight spot market indicates that contract prices can begin to rise, too. There are $0.09/lb PE price increases on the table for March and April. The current nickel increase, which seemed like a far-away dream when it was issued prior to these current market conditions, now has a real chance of at least partial implementation. It doesn’t stop there: Producers have all nominated another $0.04/lb increase for April.

PP demand was solid and prices rose at least a penny. Continuing the trend, spot-buying interest was seen from processors seeking imported resin to augment their traditional domestic supply, which has largely become insufficient. This supply/demand imbalance has helped producers secure the remainder of their $0.06/lb margin-enhancing price increase, with another $0.03/lb on the table for April.

Other processors have returned to the spot market in search of well-priced off-grade PP to counter rising Prime prices. While falling propylene monomer costs in January and February offset $0.02/lb of the aforementioned increase, monomer costs have begun to recover and are now adding to the PP market’s upward pressure.

A PGP cost push increase of $0.015/lb has hit March contracts, and with spot PGP still relatively strong, all signs are pointing to higher PP prices come April.

Read the full Market Update on the PlasticsExchange website.