Weekly resin report: PE trading reaches year’s highest point

The spot resin markets were extremely busy the week of April 11, reports the PlasticsExchange (Chicago). Not only was the flow of polyethylene (PE) requests high, but a large percentage of the realistic opportunities were finalized. The vast majority of PE and polypropylene (PP) grades held steady, although film grades remained fairly snug, particularly LDPE, which continued to march higher.

PE trading posted the highest volumes of this young year, writes the PlasticsExchange in its weekly market update. PE producers are still pushing for a $0.04/lb increase, sending processors hunting for well-priced opportunities in the secondary market. Some resellers are trying to get the full increase for their inventoried resin, but others were more aggressive and willing to take orders at prices flat to a penny higher than late March levels. The April price increase is still up in the air and we can see anything between zero and all $0.04/lb taking hold, note analysts. 

While domestic generic prime railcar offers were light and still priced to reflect the April increase, wide-spec cars were discounted as were downgraded cars sold to Houston for packaging. PE export interest to Europe remains hot, while Asia has cooled a bit and Latin American markets are about average. Better resin availability at softer prices in the Houston market might be a sign that domestic contract orders could be disappointing in April, notes the PlasticsExchange. 

Spot PP trading was good, with a decent flow of both resin offers and requests, but spot market participants were more interested in kicking tires than pulling the trigger. The market is in much better balance than during the previous five quarters, which were categorically short of supply. During that period, North American PP prices were higher than most international regions. The arbitrage was wide enough and open long enough to encourage a large inflow of resin imports to help satisfy demand, according to the PlasticsExchange. 

Domestic production is getting back on track, too. In March, producers ran resin reactors at 95% and made 100 million pounds more PP than in February. March exports doubled to an uninspiring 30 million lbs, representing just 2% of sales. Domestic sales almost hit 1.4 billion lbs, but together it was not enough to clear all fresh production, so 43 million lbs of PP were added to producers’ collective resin inventories. They entered April with over 1.55 billion lbs on hand, the first time since Nov 2014, which incidentally was when the supply/demand balance began to shift from tight to very tight, enabling month after month of margin expansion. 

It took some time, but the phenomenon of PP imports has truly made an impact. Most producers appear to be giving back some margin, decreasing April contract prices by $0.03 to 0.05/lb, at least when needed to meet competitive offers. For those resin contracts still tied to monomer, the $0.01/lb increase in April PGP contracts will have a small offset to the resin decrease.

Read the full Market Update on the PlasticsExchange website.