The spot resin markets remained fairly active, but completed volumes disappointed, as polyethylene (PE) demand struggles to keep pace with rising prices and diminishing polypropylene (PP) supplies challenge some sourcing efforts. Even so, the PlasticsExchange reports in its Market Update that this month’s volumes have already been stronger than any during the second quarter. “With a week still remaining, it should rival our first-quarter performance,” said the resin clearinghouse based in Chicago.
Exceptional international resin demand has been a driving force in the current cycle, although fresh PE export transactions also slowed this week, as the vast majority of July business had already been booked. However, there is plenty of demand waiting on deck for fresh August offers, noted the PlasticsExchange. Widespec PP continued to be sent offshore, while strong domestic prices have limited Prime export availability. Price increases are being implemented for July resin contracts. PE will secure its $0.05/lb hike, bringing the two-month tally to $0.09/lb. Another nickel increase is on the table for August. PP producers will pass through a large cost-push price increase, which could now exceed the $0.065/lb estimate and still leave room for a similar sized increase eyed for August. The hurricane season is heating up along with the waters in the gulf. Forecasters predict a particularly active season, so please be mindful of your resin supplies and plan accordingly, cautions the PlasticsExchange.
Spot PE trading suffered from sluggish demand last week. Buyers seemed to have taken a bit of a break to digest prices that have relentlessly pushed higher. The export market has helped fuel this latest leg of the rally, as the weaker dollar has made US resin more competitive. Meanwhile, domestic processors struggled to regain their footing. High-density PE prices continued to climb, with film and blow molding grades — both major export resins — adding as much as a cent. The rest of the PE grades were firm and consolidated good gains garnered in previous weeks. Producers once again found success earning their $0.05/lb increase immediately on the heels of last month’s four-cent gain. They will now shift their attention to August, where another $.05/lb increase awaits. Given current spot domestic demand, it’s hard to see an increase happen for a third month in a row, noted the PlasticsExchange in its weekly report. Then again, it is hurricane season and many are anticipating an active one. It would not be shocking to see a September increase proposed as there is rarely only one increase on the table at a time.
The spot PP market was strong, with prices gaining another $0.02/lb on the heels of soaring monomer costs. Heavy demand was seen from both processors and resellers looking to secure material before prices rose further. Availability had already thinned dramatically during the previous week or two, but some well-priced resin, both packaged and railcars, was still available early in the week. As material sold, however, few new railcar offers came along to replace it.
Resellers continued to make good markets from their inventory positions and were not shy about raising their prices during the week. Export demand remained, but aside from rougher off-grade, producers had better options selling their resin into the domestic market. July resin contracts were pointing to a cost-push increase in the vicinity of $0.065/lb, but as monomer prices continued to soar, some thoughts of a larger increase were discussed. The cost-push increase is currently pointing to about $0.13/lb between July and August. It remains to be seen where July PGP will ultimately settle, but the rest would be expected for August. In the meantime, the rise in monomer costs does not seem to be abating, and, of course, plenty could still change along the way.
Read the full Market Update on the PlasticsExchange website.