Weekly resin report: Polypropylene contracts poised to decline sharply in November

The spot resin markets continued to transact at a rapid rate last week, pushing monthly volumes to a new high for the year, reports the PlasticsExchange (Chicago) in its Market Update. While done deals were again heavily weighted in favor of polyethylene (PE) over polypropylene (PP), the latter was much better represented than in the previous week.

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Spot PE prices were steady to a penny lower while PP lost a cent. PE contracts rolled flat in October, so processors have flocked to the spot market for relative deals, as plenty of material is available at well-discounted prices. Producers will try to prop up contracts again in November. PP contracts also were flat in October and are poised to decline sharply in November as feedstock costs tumble further. The PE export market remains strong, though not necessarily through traditional channels; still, near-record volumes of PE are finding homes offshore as producer-direct sales flourish.

The spot PE market transacted at an intense pace throughout October and this past week did not disappoint, writes the PlasticsExchange. Demand was strong for most major commodity grade resins, including low-density (LD) and linear-low-density (LLD) PE film and injection as well as high-density PE injection, which has become fairly scarce. While spot PE has been on a steady decline since March, down more than a dime on average depending on grade, the overall contract market, despite some fluctuations and confusion, has been relatively flat to down just $0.03/lb. When spot decreases and contracts hold, it is common for those buyers who have some flexibility to shift some of their purchases to spot where they can procure incremental pounds at lower levels, according to the PlasticsExchange.

This disconnect is part of the reason why the spot market has been so active these past months. Spot PE prices on the PlasticsExchange trading desk were steady to down another $0.005 to 0.01/lb this week and a few grades, such as LD film and LD and LLD injection, are at yearly lows while the others are hovering nearby. The market seemed to have been rebounding a bit mid-month, as low-end spot offers cleaned up. However, the market sputtered and the lack of momentum contributed to PE contracts rolling flat for October. The average $0.03/lb hike will be pushed to November, but the increase is likely to struggle until spot and contracts close much of their gap, which continues to widen.

Spot PP trading was much improved last week. Although supplies remain relatively tight, slightly softer spot prices helped transactions to complete. PP prices gave back a penny as PGP monomer trickled lower throughout the week and now points to a meaningful contract decrease come November. Good resin demand was observed from both resellers and processors, and interest centered around co-polymer PP, both high flow and no break. Homo-polymer PP demand was scattered, with just a handful of high flow deals recorded by the PlasticsExchange. Despite some weakness, PP supply is still spotty and not easily sourced at interesting prices. With PGP monomer costs coming off, perhaps availability will pick up a tad as suppliers seek to limit uncommitted inventories.

Read the full Market Update on the PlasticsExchange website.

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