Weekly Resin Report: Prices Continue to Spiral Down

Just like the world at large, the mood at the spot resin market last week is best characterized as nervous. There was a lot of quoting but not much buying, as many participants seemed to be probing the market for ideas of price and availability, reports the PlasticsExchange in its Market Update. Still, overall interest was active, which led to good completed volumes at the resin clearinghouse’s trading desk.

Overall sentiment is negative, as the COVID-19 pandemic has led to many non-essential processors temporarily shutting down. That has put a significant dent in demand for some products, such as automotive and other durable goods; packaging and medical supplies are faring much better.

Spot commodity resin prices remained under pressure. Some polyethylene (PE) grades managed steady, but others saw losses of $0.02/lb; polypropylene (PP) also took a 2-cent hit. PE contracts rolled flat in March and PP contracts followed PGP lower, both of which were down $0.04/lb.

Spot PE trading again was slightly off the pace it had been running before COVID-19 shuttered much of the world economy. However, considering the current global environment, it's encouraging that opportunities have been flowing through its platform, said the PlasticsExchange. Completed volumes were close to average, as processors and resellers were not shy to reach out and ask for updated quotes, albeit mostly for truckloads rather than railcars.

The selling environment has been very competitive, as many trading partners seek to reduce inventory with the expectation that prices will move lower in the coming weeks and months. So far, increased demand for packaging in the food and medical sectors has been enough to keep PE running at a decent clip, according to the PlasticsExchange, but the overall mindset is that demand will eventually slow substantially. As much of this happened very quickly, resellers did not have time to shed higher priced inventory, so the spot market has been moving down slower than many processors would like, as suppliers fight to limit losses. Most spot PE prices were flat this week, except for linear-low-density PE; film grades lost a penny while injection lost 2 cents on improved supplies. Producers will wrestle with contract price decrease expectations that are sure to come, adds the PlasticsExchange.

Spot PP trading renewed a stronger pace, as buyers adjusted to market conditions and demand improved a bit. Prices for co- and homo-polymer PP slid another 2 cents, however, amid improved supply and deeper off-grade discounts. This marks a 6-cent drop over the past five weeks, sending prices 2 cents lower than when the year started.

Prime co-polymer PP was the most actively traded product, with railcars transacting more than truckloads and reseller demand eclipsing processor buying. Although co-polymer PP railcar supply has improved, spot truckloads for immediate shipment remained difficult to source, especially for prime material. Homo-polymer PP truckload availability was better and most commodity grades were accessible.

It will take time, but with early signs of improvement in COVID-19 hot spots in Italy, Spain, and the United States, markets appear to see some sort of light at the end of this tunnel. Until then, the PlasticsExchange expects demand to be sporadic, with processors filling just-in-time needs and re-sellers shopping with a view to when manufacturing returns to more regular levels.

Read the full Market Update on the PlasticsExchange website.