Weekly resin report: As prices continue to climb, resin availability swells, until it doesn’t

The spot resin markets continued to transact at a significantly heightened pace last week, far outstripping the previous week’s activity, reports the PlasticsExchange  (Chicago) in its Market Update. Both polyethylene (PE) and polypropylene (PP) prices continued to climb with gains of $0.02 to 0.05/lb, depending on grade. The week, however, did start out a tad slower, partly because Mondays are simply the slowest trading day of the week. After such a fast and furious price rise over the previous two weeks, there was a real lull in transactions as market participants digested these elevated prices. 

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On Tuesday, new offers emerged from suppliers who had held back material in the immediate aftermath of the storm. The higher level was too compelling and resin availability swelled. Others that had waited for assurance that their warehoused material was not affected by the Houston flooding also began to sell off their stocks, much to the satisfaction of processors in need. Further, as the Houston area railroad tracks cleared and cars began reaching packaging facilities, another round of material became offered as the resins’ ready dates became known. With a heavy flow of fresh supply, the market paused for a moment, and the rally temporarily stalled; there was even an intraday down tick that did not last, writes the PlasticsExchange.

Then on Wednesday afternoon, word began to circulate that a major HDPE complex that was flooded would remain offline at least until mid-November. Around the same time, there were discussions that Hexene co-monomer would be extra short and another run on LLDPE film resins also ensued. The PlasticsExchange reports that its phones lit up, with orders for several thousand tons rushing in. Available HDPE blowmolding and LLDPE film supplies were cleaned out, and some buy orders remained unfilled. This surge pushed prices even higher, which magically brought out additional resin offers that were also instantly scooped up by the pent-up demand. 

Early in the week, PE prices paused in their ascent, but the rally regained steam as details emerged that some production disruptions would persist. HDPE for blowmolding, which has been the PlasticsExchange’s highest volume-traded material, has also seen the largest gains. The grade added another nickel this week, bringing the post-hurricane increase to a stunning $0.175/lb. With prices soaring, supply has come out of the woodworks. There have also been sizable cargoes of HDPE blowmolding material ordered from overseas to help cover the supply gap. Spot prices for all other commodity PE grades have soared, as well, each with gains of at least $0.115/lb. As a reference, the PlasticsExchange has included a table on its website outlining the past four weeks of spot PE prices. 

While spot PE prices have sprinted well ahead of contracts, a series of price increases are also falling into place. The once scoffed at August $0.03/lb increase took hold, as Harvey hit the Houston shore and a smattering of staggered increases were subsequently nominated by the PE producing community. Each producer has at least $0.07/lb on the table, with one producer adding yet another $0.03/lb for mid-October to total a dime. The PlasticsExchange notes that it has yet to see others follow. 

The spot PP market has also seen a tremendous price rise, and while transacted volumes have also soared, trading has been curtailed by limited supply. Spot railcars from areas outside of Houston have continued to flow, but there’s been nary a chance to secure many. Pockets of warehoused PP material continue to deplete, and once they sell, the next best offer has generally been $0.02 to 0.03/lb higher. Spot PP has sprinted well ahead of PP contract levels, but some catch up is at hand. 

While the August increase was held to $0.01 to 0.02/lb, the PlasticsExchange expects September contracts to jump by the full pending $0.07/lb PGP cost-push increase plus the balance of the $0.03/lb margin increase that did not take hold in August. All in, PP contracts are expected to rise about a dime between the two months, and they seem poised to continue higher ahead given the lack of compelling import arbitrage, upward pressure on monomer costs, and the absence of a new PP project even near completion. PP could be a sleeping giant, just starting to awaken.

Read the full Market Update on the PlasticsExchange website.

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