Weekly resin report: PE price increase looks like it will stick

Spot resin trading slowed the week of April 18 from its fervent pace, but there were enough bursts of activity to generate average volumes, reports the PlasticsExchange (Chicago) in its Market Update. Polyethylene (PE) and polypropylene (PP) prices were steady across the board, although some film grades were notably tight. Fresh railcar availability was generally limited, which was equally matched by dull buyer interest. 

The PE market experienced a lull in buying after several weeks of solid action. Prime railcars offered to the spot market included the full $0.04/lb increase, which was not compelling to contract buyers. There was greater interest in off-grade material, which was still available at a discount. Producers are holding firm on their intent to fully implement the April $0.04/lb price increase; buyers are trying to resist, but it’s late in the month and looking ever more likely that the increase will stick. 

PE prices in Houston have been inching up, too, with good demand from Europe and Latin America aiding export sales. HDPE blowmolding and LLDPE film grades have tightened up amid production constraints caused by scheduled resin plant maintenance. Traders have been apprehensive about procuring speculative inventories, so supplies are thinning as material is sold. LDPE film grades remain very snug and are challenging to source, particularly high clarity and fractional melt, according to the PlasticsExchange. 

If the April increase holds, the two-month gain in PE will be $0.09/lb, bringing contracts back to levels not seen since August 2015. One producer announced a $0.05/lb increase for May, but PlasticsExchange analysts have not seen any others follow. The sharp jump caught some by surprise: While processors seek to minimize high-cost purchases, they still need resin to run. For some resellers the increase is a boon to help liquidate slow-moving material.

PP trading was slow last week. The market is fairly balanced and even, perhaps, well-supplied at the moment. Overall pricing was flat, although wide-spec pricing was weak. The significant flow of imported resin appears to have satisfied the shortage that developed during 2015 because of production issues and strong demand. Domestic production is also expected to improve in the near term, as a couple of reactors are brought back online from scheduled maintenance. 

April PP contracts are mostly decreasing $0.03 to 0.05/lb, not including the offsetting $0.01/lb increase in PGP monomer. North American PP prices have been far above PP in most other international regions and the wide arbitrage encouraged imports. Producers seem to be reacting to competitive imports by lowering prices to protect their share of the domestic market, notes the PlasticsExchange. As the landed resins sell, national resellers and traders will be more cautious with speculative imports given that their margins have shrunk. This could again lead to a more tightly supplied market ahead.

Read the full Market Update on the PlasticsExchange website.