The first weekly downtick since Hurricane Harvey hit saw polypropylene (PP) and polyethylene (PE) prices ease a cent almost across the board on the spot resin markets last week. Most resin buyers have been waiting on the sidelines for peak pricing to play out, reports the PlasticsExchange (Chicago) in its Market Update. However, trading picked up substantially as the days passed and some realized that supply issues will generally persist. By Friday’s close, the PlasticsExchange had again recorded exceptional volume—for the week, month and quarter.
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Spot PE activity came in spurts, and the lulls, while short lived, spooked suppliers a bit. Overall, prices eased a penny on average, with the exception of HDPE for injection, which was super scarce even before the storm. HDPE blowmolding could also be tight for the rest of the year, according to the PlasticsExchange. Even though most reactors are back up and running, the lack of production crimped availability, especially with some key planned maintenance projects currently underway.
While PE supply remains constrained and the elevated price levels have been maintained, there is a fear among producers that one day the bubble will burst. In the meantime, while spot prices led the way, contract levels are catching up quickly. All producers implemented a $0.03/lb increase in August; the five producers that nominated a $0.04/lb increase for September have secured it and the four producers that waited for October will begin to invoice the total +0.07/lb increase. Several producers have added another $0.03/lb increase for mid-October and one is targeting Nov. 1. Two of the new petrochemical complexes that have been in the works for years have begun operations, leading the PlasticsExchange to surmise that the increases will unravel. The question is, when?
The PP market also stalled in its ascent last week, and after a sharp $0.165/lb rally, it eased a tad, but only by a penny. Most processors should have seen a $0.10/lb increase between August and September. The market seems poised for further gains as resin supplies are still short, monomer remains tight and PGP costs keep climbing, according to the PlasticsExchange. A few cent cost-push increases seem imminent for October, and producers, who have finally expanded margins with a successful increase, will likely leverage the upward momentum and soon nominate an additional increase. “We remain bullish on polypropylene,” said the PlasticsExchange.
Read the full Market Update on the PlasticsExchange website.
Chemicals sector recovering rapidly from hurricanes
In its assessment of the chemicals supply chain in the aftermath of hurricanes Harvey and Irma, business intelligence company IHS Markit (Lexington, MA) sees a rapid recovery, although bottlenecks will continue to challenge some value chains.
On the plus side, chemicals producers have continued to improve their resiliency to hurricane events, noted IHS Markit. Risk assessments have resulted in reinforced structural systems and added redundancy for critical piping and control systems, implementation of precautionary actions regarding asset operations and pre-positioned inventories.
“In the next decade, the U.S. will build 25% of the world’s needed capacity for new chemicals demand. U.S. chemical exports will double from 2005 levels, linking the global chemical markets integrally to events that affect the U.S. Gulf Coast,” said Dewey Johnson, Executive Director, Chemicals, for IHS Markit, in a prepared statement.
Because of minimal asset damage, the chemicals sector is recovering rapidly from Hurricanes Harvey and Irma. “With that said, various value chains are not back to pre-event production levels due to bottlenecks from feedstocks or unit operations within the plants,” said IHS Markit.
Chemical product supply chains that were already in tight supply (propylene, polyethylene, caustic soda and so forth) will see additional tightness perhaps lasting into the first quarter of 2018. A number of the chemical products will see price increases cascading through their supply chains into the first quarter due to an exacerbated tight supply and elevated costs due to recovery and feedstock cost increases, said IHS Markit.