Nervous trading spread through the resin markets last week, as periods of calm alternated with bursts of activity. While some sellers fear that low upstream energy and feedstock costs will translate to sharply lower resin prices ahead, other market participants clawed for material, almost as if it were toilet paper at the supermarket, finding comfort in added resin inventory for their factory floors, reported the PlasticsExchange in its Market Update.
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Two major Houston export terminals were temporarily shut, creating fear of export disaster, but then quickly reopened. The PlasticsExchange reports having already seen a spike in freight costs, as trucking capacity became scarce and drivers canceled lanes at the last minute. While these conditions can be frustrating, most market participants seem to be taking these disruptive days in stride, writes the resin clearinghouse based in Chicago, as there are larger issues in the big picture. Resin prices continued to hold relatively firm: Most prime polyethylene (PE) and polypropylene (PP) prices shed just a cent this past week, although larger discounts were spotted for off-grade materials.
PE trading slowed last week, as market participants assessed the ever-changing global COVID-19 pandemic. Completed volumes at the PlasticsExchange trading desk fell short of its recent averages, which was anticipated as much of the supply side of the industry joined much of the country and shifted to work from home. Many processors took a conservative approach to ordering material; however, some reacted in the opposite fashion and ordered extra resin in case supply channels are crimped or shut off. Few reports have surfaced of temporary closures of processing facilities, but we expect to see some soon, said the PlasticsExchange. So far, resin production has not been affected and seems to qualify as an essential component of our economy.
Softer demand and falling energy and feedstock costs pulled most spot prices down a penny, with still scarce low-density PE film and linear-low-density PE injection both holding flat. Producers recognized the sensitivity of the overall situation and delayed implementation of their current $0.04/lb contract price increase. At this time the PlasticsExchange suggests a conservative approach, but also recommends making sure there is enough resin on hand to run, as market conditions can change quickly.
Spot PP trading was strong despite the ongoing challenges and new developments surrounding the novel coronavirus pandemic. Overall PP demand has been healthy: Deal flow was fairly consistent throughout the week and well spread between grades, quality and transaction sizes, with both processors and resellers active participants. A handful of railcars completed, while truckloads were favored as buyers proceeded with caution.
Lower PGP costs are slowly making their way into spot pricing, as homo- and co-polymer PP both shed a penny for the third week in a row, reverting to levels seen at the beginning of 2020. Supply continues to be tight for prime, while off-grade railcars are appearing at more competitive prices. Truckloads of co-polymer PP were difficult to source, and rapidly rising freight rates triggered some sticker shock. Homo-polymer PP on the other hand is easier to source, and most commodity grades can be procured as railcars and packaged truckloads. It remains to be seen how this week plays out, as businesses that are considered non-essential could temporarily shut down and affect demand. March PP contracts are expected to decrease along with the change in monomer, but we may potentially see some offset by a margin increase, according to the PlasticsExchange.
Read the full Market Update on the PlasticsExchange website.