Weekly resin report: PE producers shock market with cut in resin prices

The spot resin market was active last week, with orders flowing from buyers and sellers resulting in a high volume of completed transactions, reports the PlasticsExchange in its Market Update. Deals were well distributed among polyethylene (PE) and polypropylene (PP) grades for both domestic and export (mostly PE) shipments.

Spot PP prices had their first weekly uptick since the end of February. Spot PE prices mostly held steady, but there was a pretty big surprise in the contract realm. PE exports to Europe have been good, aided by a weakening U.S. dollar. Incremental sales to the Indian and Asian regions have been hampered by price disconnection, however, although sentiment in those regions seems to be improving. 

Spot PE trading was strong, and transactions came to fruition with relative ease, reports the PlasticsExchange. Pretty much all that was needed to transact HDPE injection was available supply at a reasonable price. PE producers gave their final $0.03/lb increase a third shot in May, but hopes were dashed last Thursday, when a major producer announced that it would hold contracts flat this month. Two other producers then shocked the market on Friday by following up with an actual $0.03/lb decrease for May, leaving their prices up only a net nickel for the year. 

The balance of producers had not announced their final May pricing as the week drew to a close and they do not necessarily need to follow lower, especially strong producers of HDPE for injection, which remains extremely scarce. The PlasticsExchange had previously voiced doubts about further rises in contract prices beyond the $0.08/lb already implemented, but it thought that a decrease might not come through until June. The market should find some clarity in the coming week. While rare, a split decision is actually possible, though it probably would not last long. 

Spot prices for most commodity PE grades peaked at the end of February and have since generally declined $0.03/ lb. However, HDPE for blow molding has eroded $0.06/lb, as producers dramatically lowered levels seemingly to spark demand for this heavily exported grade. Spot LDPE for film saw its typical wide premium erode $0.07/lb and has become a relative deal compared with other film grade resins. Only HDPE for injection has bucked the down trend and is actually up another $0.015/lb since March. 

PP trading improved: While there was still a decent flow of off-grade railcars this past week, resellers’ prime inventories have thinned out significantly and overall supplies have dried up. Processors also became a little more aggressive with their buy orders, bringing better stability to the market. After rallying some $0.16/lb starting in December, spot PP prices peaked in the beginning of March and since have fallen $0.10/lb. The market finally eaked out its first weekly gain, rising $0.005/lb into this past weekend. 

After PP contracts soared $0.205/lb during the first quarter, processors limited their high-priced purchases, and domestic demand in April slid nearly 5% below the 12-month average. It again feels soft in May, which also means downstream inventories are getting low. PP production in April was throttled back 8.5% below the 12-month average and the lack of supply is starting to be felt. Now that contracts have declined $0.135/lb these past two months and another decrease, if any, in June would be minimal, market sentiment should start shifting from bearish into neutral and could potentially even turn a bit bullish.

Read the full Market Update on the PlasticsExchange website.