Weekly resin report: PP prices may have hit bottom

Last week, shortened by Independence Day in the United States, ushered in the third quarter, but spot resin market activity was slow to begin, as many market participants took off for their summer vacation, reports the PlasticsExchange (Chicago) in its weekly Market Update.

Polyethylene (PE) contracts rose $0.09/lb during March and April, and after two months of flat pricing, buyers are actively seeking to peel off the last $0.04/lb increase as a July decrease. While the timing for relief could be ripe given growing upstream inventories amid slack exports and economic uncertainty partially due to Brexit, PE producers are not necessarily eager to give up their margin. Although the cracker and reactor maintenance seasons have generally concluded, some production issues persist, potentially leading to another month of interesting negotiations, according to the PlasticsExchange. 

After several months of sharp declines, polypropylene (PP) prices have been searching for a bottom and may very well have found it at the end of June. 

PP producers proactively dropped contract prices by as much as $0.10/lb during the second quarter to effectively shut off the import arbitrage, which had encouraged such an inflow of resin that pricing power had tipped into the hands of processors. 

After a May/June purge of surplus upstream inventory into the export market and with signs of production being throttled back, the PP market has consolidated and seems to be primed for an upturn. Some resellers caught with material ahead of the second quarter tumble that had resisted selling near the bottom have begun offering material back to the market at prices that again start with a 5. 

Spot prices have already ticked a bit higher, but are not sprinting to the upside at this time. While many have added to their inventories at bargain levels that had not been seen in some seven years, buyers are still out looking for deals. Some buyers that procured well-priced PP during June scoffed at higher prices, expecting more of the same. 

All in all, transactional volumes of PE and PP were below average, which was not surprising given the timing. We expect the market to begin heating back up in the coming week.

Read the full Market Update on the PlasticsExchange website.