Weekly resin report: PP prices drop another cent

Like many of us, the spot resin markets chilled the week of May 30. Cooling from their rapid pace during a holiday-shortened week, the markets slowly ramped back up starting on June 1, reports the PlasticsExchange (Chicago) in its weekly update. Polyethylene (PE) offers were on the light side, which is typical for the first week of the month, and PlasticsExchange analysts expect supplies to improve in the near term. Polypropylene (PP) was more abundant and resumed its price erosion with some shock-worthy deals. 

Spot PE trading was somewhat slow to re-start after the industry emerged from a three-day weekend. While the flow of railcars increased toward the end of the month, the type of onslaught that was prevalent in previous months did not materialize. Some generic prime railcars were available, and nice discounts were afforded for off-grade material. Prices were a little softer in Houston. Overall, HDPE prices slid as much as $0.01/lb, while LLDPE and LDPE held firm. 

As soon as producers garnered the $0.09/lb increases during March and April, processors were already talking about prices peeling back. While the PlasticsExchange confesses to feeling a level of negative sentiment in the spot market, it has been vocally less bearish for a quick contract decrease. May was too soon, especially since the increases needed to work all the way downstream, and then June came into focus for a decrease, but the odds are building against it. 

Domestic production issues have restricted supplies and kept the market snug, with some grades outright difficult to source. During the heavy maintenance season, which continues to drag on, producers drew heavily from their collective inventories to satisfy strong demand, leaving their coffers with ample storage room, if needed. 

With the development of new petrochemical complexes underway and some international plants beginning to come on-stream, the supply situation will imminently change. In the meantime, producers have at least this last hurrah and seem intent to maintain this price level through June. The spot market probably will continue to ease, but it might take until July before contracts take the hit. 

The spot PP market has certainly bucked its trend. Instead of looking for material to satisfy demand, the PlasticsExchange says it was busy finding buyers to place unsold supplier inventories. Producers have been lowering PP prices not only to compete with imported resins, but the dime drop this quarter, including a nickel in June, served to send a message to resellers to limit their future imports. The PP market remains pressured and prices dropped at least another penny this past week, with larger cuts seen for resin targeted for export. 

For years, US producers had not required a robust export outlet to liquidate prime resin, but times, they are a-changing. Upstream PP supplies had swelled to burdensome levels, leading to a rare purge of prime material into the export market. While off-grade resin has already been priced aggressively to enable offshore sales, it was a surprise to see prime sold at the same level. Although the market seems to have already cleaned up a little, some resellers took positions and have well-priced material available. There are currently some compelling deals out there worth taking stock, according to the PlasticsExchange. 

The hurricane season is officially underway. While the gulf has been spared in recent years, no one has forgotten the havoc these storms can bring to peoples’ lives and our petrochemical industry.

Read the full Market Update on the PlasticsExchange website.