With all Houston-area petrochemical plants affected by Hurricane Harvey finally fully operational or well on their way, the spot resin markets have reverted to a more typical environment, at least for the moment, reports the PlasticsExchange (Chicago) in its weekly Market Update. While the market is far from flooded with resin, and some suppliers still need to back-fill some orders because of the production gap, spot polyethylene (PE) offers continue to flow as storm-related premiums erode. Polypropylene (PP) offers have been a bit more sporadic: Most commodity grades have been offered for prompt shipment, but generally in limited volumes.

Spot PE trading hummed along at a healthy pace, as supplies continued to improve and prices peeled off more of their hurricane-induced premiums, writes the PlasticsExchange. Most commodity-grade resins came down about $0.02/lb, some as much as $0.03/lb. However, LLDPE film grades, which remain tight, recovered a penny as levels had fallen too far too quickly. Indeed, it is a rare occurrence for LDPE film resins to be priced below LLDPE. While not all PE grades were easily accessible for immediate shipment and in high volumes, the market has now transitioned past urgent procurement mode into what might prove to be a short-lived, normal-type market. 

Sentiment has shifted from runaway bullish in the immediate wake of the storm to a period of pause and reflection near the peak, and is now leaning toward outright bearish as the calendar approaches the second half of the fourth quarter, which usually brings tight inventory management. Beyond year-end pressures, which are not quite on the immediate horizon, participants are also eyeing the three new major resin plants starting to come to market. As domestic processors seek to limit their purchases while they wait for prices to fall back below pre-hurricane levels, attention needs to focus on the export market and the lower Houston levels needed to help clear excess inventories that could quickly accumulate in this developing environment. 

PP trading was very steady, according to the PlasticsExchange. There was a consistent flow of buyer inquiries, but mostly for smaller truckload quantities. Off-grade prices remain discounted to prime, which held flat this past week. Domestic demand had been somewhat lackluster after the sharp rally, but processors seem to have become acclimated to this elevated level, as this market cycle seems to still have some legs. Do note, though, that a long-awaited new PDH unit, which should finally become operational late this year, could put a damper on PGP prices and bleed downstream into resin. However, supply/demand dynamics are tight and with no new PP production on the horizon, the PlasticsExchange believes additional PP margin expansion could be forthcoming. 

Read the full Market Update on the PlasticsExchange website.