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Weekly resin report: Polyethylene price increase rumored for February

TAGS: Materials
Weekly resin report: Polyethylene price increase rumored for February
The PlasticsExchange foresees upward market momentum in the new year, as rumors begin to swirl of a $0.05/lb PE contract price increase for February.

The spot resin markets ended the year on an uptick, writes the PlasticsExchange (Chicago) in its Market Update, as both polyethylene (PE) and polypropylene (PP) prices began to recover in early December. After a sharp downward trend, some processors seemed to be caught off guard and quickly agreed to pay several cents more for material.

The trading business was very good during the first half of December, which carried the month, and most market participants concurred, completing the bulk of their business by mid-month. As the year drew to a close, fresh railcar offers dwindled, as producers instead relied heavily on exports to clean up the spot market. Significant railcar and packaging delays in Houston added to tightening supplies, which was somewhat countered by local traders eager to move out material that was already packaged and avoid an end-of-year inventory tax.

Sentiment has turned from neutral to cautiously bullish. The PlasticsExchange foresees upward market momentum to continue at least into the first couple of weeks of the new year, as rumors begin to swirl of a $0.05/lb PE contract price increase for February. 

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Although there was good price volatility during 2016, prices for most commodity PE grades finished the year within a cent or two of 2015 year-end levels. The 2016 lows were put in place in February, completing a long down cycle that began in 2014. From there, the market steadily recovered and peaked in September, before giving back almost all the gains only to again bounce these last few weeks in December. The $0.05/lb contract price increase that is being floated for February could add a little fuel to the fire before a glut of resin from planned production expansion hits the market in spurts throughout 2017. 

The spot PP market found a bottom in early December, as producers maintained lower operating rates while leveraging the export market to move material and tighten supplies. Even rougher off-grade disappeared, as the low-end cleaned up and prices experienced a small vacuum to the upside. Some processors were seen scrambling to procure resin at bargain-basement prices not seen in about seven years, reports the PlasticsExchange. Spot PP prices continued to recover into year end, as fresh railcars were virtually non-existent and resellers with material continued to inch up prices. Special year-end deals were not as plentiful as in years past.

There were a few failed rallies during the summer and fall, and PP prices only finally found solid footing in late November and early December. PlasticsExchange analysts tallied $0.13/lb in spot PP losses in 2016, a drop of nearly 21%. 

Read the full Market Update on the PlasticsExchange website.

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