Weekly resin report: Polypropylene contracts headed down by a dime

Thanksgiving week ushered in a very quiet spot resin market. The flow of offers was limited, and processor demand was also reduced, partly tied to the holiday, but mostly because of negative sentiment and the belief that lower prices lie ahead, according to the PlasticsExchange (Chicago).

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Prices for both polyethylene (PE) and polypropylene (PP) remained pressured and levels slipped a penny across the board. Despite producers’ attempt to implement a $0.03/lb price increase on November PE contracts, a major consultancy suggests an opposite $0.03/lb decrease has entered the market instead. We agree with the decrease, writes the PlasticsExchange in its Market Update, as spot prices have been falling and developed a large discount to contracts. PP contracts should average down $0.10/lb this month, commensurate with a drop in PGP contracts.

The spot PE market was sluggish, as many buyers took an extended holiday break; this made it difficult to transact even when stellar offers were presented. Spot PE prices were all down a penny this week at the PlasticsExchange desk, as market conditions are bearish, even though not all grades are easy to source. Not only were participants out, but demand in general has been off amid negative sentiment, and prices have been slipping, which contributed to an already slow market for November. With just a week to go, volumes are moderately below average. Inventory positioning is in full effect, as most are choosing to work down resin on hand, waiting to restock at lower levels. Contract prices have not officially settled, but given weak demand and market sentiment, the average $0.03/lb increase seems implausible while the lobby for a $0.03/lb decrease is growing. The crude oil markets continue to get pummeled, which will have an effect on export pricing, while the domestic natural gas stream rose further. In aggregate, that will crimp producer margins.

PP trading was slow and prices for both homo- and co-polymer PP slid a penny. The flow of offers was intermittent, but suppliers let it be known that well-priced resin was available for the asking. The holiday season is usually a bit slower, but combine that with a $0.10/lb drop in PGP costs and the resultant lack of resin demand has been justified, writes the PlasticsExchange. Still, some deals were completed for the standard commodity grades as well as tougher to source co-polymer PP No Break and Random Clarified.

November PP contracts should follow PGP contracts down a dime, notwithstanding a possible margin increase. The PlasticsExchange believes this will help to shut the easy import arbitrage and could lead to a modest lack of supply in the early new year. In the meantime, there are deals to be had.

Read the full Market Update on the PlasticsExchange website.

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