Weekly resin report: Plastics processors play waiting game

The spot resin markets were again slower than usual the week of May 9, generating somewhat disappointing volumes during the first half of the month, according to the PlasticsExchange (Chicago). Overall polyethylene (PE) prices were steady; polypropylene (PP) remained under pressure. Spot PE offers were light and processors were equally absent from the market. PP availability was well distributed among grades, but in limited volumes. Trading activity increased toward the end of the week, but transactions were still difficult to consummate, reports the PlasticsExchange in its weekly Market Update. 

Spot PE trading was lackadaisical, and processors who did not have an urgent need for material saw no need to chase relatively high-priced resin. LDPE and LLDPE film grade supplies have been marginally improving, but are still considered tight. HDPE blowmolding and injection grades can be readily sourced in truckload and small one- to two-railcar volumes. PlasticsToday says that it expected to see light offerings during the first half of May that would support a contract price rollover, which seems imminent. 

Domestic resin demand feels off so far this month and processors complain of diminished finished product sales; still they seem to be conceding to flat contracts in May. While market participants, particularly buyers, have been talking about a June decrease, PlasticsExchange analysts note that they have yet to see the burdensome supplies that would support such actual price movement. While exports to Europe remain strong, Asian pricing and incremental exports are soft. Resin reactors are also getting ready to begin returning from maintenance, so it is very possible for resin availability to quickly develop during the second part of this month. 

Spot PP transactional volumes were around the new average. Generic prime PP prices dropped another cent, with deeper discounts seen both for off grade and resin destined for export. A full slate of imported resin is warehoused around the country and domestic railcars are generally accessible, as well. Improved resin availability has provided processors with the confidence to keep less material on hand and source material in the spot market, if necessary. 

The PlasticsExchange expects May PGP monomer contracts to roll steady, as processors look for price relief in addition to the $0.03 to 0.05/lb break they received in April. While the PP market has turned and pricing power now sits tentatively with buyers, analysts anticipate an eventual shift back toward tightness. Producers responding to competitive imports with a decrease have whacked the margin that resellers have enjoyed selling imports. 

As the easy and wide arbitrage has shrunk, PlasticsExchange believes that fewer speculative pounds will be imported in the next round. Still, processors have learned the lesson of supply vulnerability, so as long as imported resin can be procured at a competitive price, it is deemed wise to maintain the supplemental channel open and flowing even at reduced levels, for the purpose of both sourcing and negotiating strength.

Read the full Market Update on the PlasticsExchange website.