Weekly resin report: Processors begin preparations for reduced year-end inventories

Domestic demand in the spot resin trading market slowed last week, as asking prices for fresh offers ratcheted higher, but strong exports again brought completed volumes to solid levels, reports the PlasticsExchange (Chicago) in its Market Update. Some special discounts for commodity grades in the domestic market—suppliers still had railcars requiring disposition before the end of the month—helped move some material, but notwithstanding one-off deals, overall pricing for both polyethylene (PE) and polypropylene (PP) balanced out steady.

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PE contracts are rolling flat for October after achieving a $0.03/lb increase in September, and there is another $0.04/lb on the table in case a major supply disruption or market shock occurs. PP contracts were up a penny in September, but then followed monomer down $0.02/lb in October. Elevated exports continued to cause congestion along the Houston grid, creating a significant backup of railcars waiting to package. These delays have placed a premium on packaged material that is ready to go.

The spot PE market managed to put together a pretty good trading week, but it was an uphill battle all the way. Trading volumes at the PlasticsExchange desk were only average, with lackluster domestic demand lifted only by healthy export sales. Domestic asking prices have edged higher over the past few weeks to get more in line with the $0.03/lb contract increase implemented in September. However, processors have begun to position for reduced year-end inventories, so orders were calculated and volumes were minimized as needed. As a result, deal making was challenged and supply was subsequently squeezed to achieve competitive pricing, tightening trading margins last week, reports the PlasticsExchange. The September three-cent increase is solid, and the October $0.04/lb nomination has been pushed off to November. Export is alive and well, as other regions of the world continue to tap the U.S. market for well-priced discounted material. If participants are willing to work thin, there are large incremental volumes ready to be moved through this channel, according to the PlasticsExchange.

Spot PP trading was good, but not extraordinary, and both homo- and co-polymer PP prices ended flat for the week. While supplies for both groups of materials were generally ample, the market should not be classified as grossly over-supplied, as it required deft searches to match up the right supply to spot demand. Completed transactions favored truckloads over railcars and co- over homo-polymer PP. Traders were more active buyers in our market than processors this past week, writes the PlasticsExchange in its weekly report. Although PP contracts decreased $0.02/lb this month, spot material was already priced at a steep discount, so transaction prices at the resin clearinghouse actually have been steady to a penny firmer, as these levels move toward convergence.

Read the full Market Update on the PlasticsExchange website.

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