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Weekly Resin Report: Processors Face Thinning Supplies and Escalating Prices

Heavy demand from both processors and resellers came up against insufficient supplies last week caused by lingering production disruptions.

PlasticsToday Staff

September 30, 2020

3 Min Read
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Image: Peshkov/Adobe Stock

It has been a month since Hurricane Laura ravaged Louisiana, but it continues to have an impact on resin trading, as heavy demand from both processors and resellers came up against insufficient supplies caused by production disruptions. Area resin plants remain without power and are unable to restart for another couple of weeks, possibly longer, reports the PlasticsExchange in in its weekly Market Update.

Prime resin availability, especially polypropylene (PP), dwindled further. Consequently, many buyers have become more flexible in their sourcing requirements — suddenly, good off grade does not look so bad. PGP monomer contracts rolled steady and PP contracts disengaged from their lock-step correlation to these upstream costs, as a $0.03/lb margin-enhancing increase finally — and deservedly — took hold this month. Spot polyethylene (PE) prices trudged another penny higher, as producers implemented their September $0.05/lb increase, the fourth in as many months. Another nickel uptick looms for October. 

Demand was strong in the spot PE market, but buyers had to contend with thinning supplies and escalating prices. Until production issues are resolved, supplies will remain on the snug side. Processors had been running through their inventories in the hope that the market would break before they needed to refill their silos, but supplies were tightening even before last month’s hurricane. Many processors could not hold out and have been returning to the market for material. Fresh railcar availability was tight, said the PlasticsExchange, and buyers often settled for multiple packaged truckloads instead. Resellers' warehoused stocks have been picked through: High-density PE for blow molding and film is joining the sparse ranks of low-density (LD) PE and linear-low-density (LLD) PE injection grades, which disappeared weeks ago. The PlasticsExchange reports seeing a normal pace and steady demand for LDPE and LLDPE film grades, and they remain fairly available. The reseller export market was more active last week, as October offerings began to show and the resin clearinghouse was able to sell some material to offshore destinations.

Polypropylene sourcing stymied by scarce supplies

PP demand was heavy and sourcing was difficult amid force majeure–fueled scarce supplies, sending spot PP prices up another two cents. They were generally well above contract levels, which are also rising. Prime PP railcars remained absent from the secondary market and buyers competed for good off-grade material. Some low-quality railcars sold into compounding. Resellers provided some prime liquidity from their warehoused inventories and buyers in need scooped up all seemingly good deals: Homo-polymer PP 12, 20, and 35 melts flew off the shelves; some Prime Raffia remained.

There was plenty of co-polymer PP demand, too, but relatively few pounds transacted, as sparse availability stifled most opportunities. September PGP contracts rolled flat, but tight dynamics enabled resin producers to implement a mostly $0.03/lb increase for September PP contracts. Those processors unaffected by allocations and shortages see current spot prices as frothy. These prices, indeed, are unsustainable when supply again normalizes, but the question is when. The PlasticsExchange retains its bullish outlook, but, it adds, with growing caution.

Read the full Market Update on the PlasticsExchange website.

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