The first week of October turned out to be uncharacteristically active in the spot resin markets, according to the PlasticsExchange (Chicago). A substantial flow of polyethylene (PE) offers resulted in a slide in spot prices for the second week in a row. Although there was a smattering of fresh polypropylene (PP) offers, trader inventories are starting to thin a bit and spot prices were steady. Export demand perked up; there was improved interest for PE from Latin America and Europe, while high-volume buyers from the Indian and Asian regions were seeking PP deals, reports the resin clearinghouse in its weekly Market Update.
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Both PE buyers and sellers came to transact, which led to a high percentage of completed deals. Resin availability has been improving and leaning on spot prices, which was clearly welcomed by buyers. Processors that bought heavily in August, ahead of the September price increase, have been working through their resin and have recently come back to the market for material. Resellers also stocked up in August and had been unloading for the better part of the past three weeks, reports the PlasticsExchange.
As soon as the September $0.05/lb PE contract increase was implemented, spot prices began to ease. A robust amount of fresh PE railcars were offered this past week, including the notable appearance of previously absent grades. HDPE lost $0.01/lb across the board; film grade LLDPE butene and LDPE high clarity each gave back a bit more.
The September nickel brought the PE gain to $0.14/lb since March. Without another industry-wide price increase on the table, the best PE contracts will do in October is to hold steady. The market is still relatively tight and there are back orders to fill even before the market is considered balanced. Producers then have room to rebuild some inventory before they allow the contract market to get sloppy. However, that still does not preclude good spot buying opportunities ahead, some of which are already at hand.
The PP market remained active, with processors, who are facing another sizable cost-push price increase in October, tapping the spot market for well-priced material. However, overall PP supplies are still ample and could challenge the magnitude of additional price advances. PP producers took another $0.06/lb increase for contract PGP monomer in September, bringing the two-month tally to $0.095/lb. The September PP resin increase averaged $0.035 to 0.04/lb, and unless another resin increase can be implemented, margins for non-integrated PP producers could erode by as much as $0.06/lb.
Resellers brought in huge volumes of excess PP during the summer months, just as monomer was starting to bottom. It seemed like a logical inventory purchase, writes the PlasticsExchange. However, PP producers kept pumping out resin and the plentiful supplies kept a lid on the resin recovery rally. There were several subsequent purges of resin into the export market, but the overhang did not fully clear and the initial rally fizzled out. Export demand is again coming on strong. If the oversupply were to get cleaned up this time, there could be a price vacuum that quickly lifts prices along the full $0.50/lb range. In the meantime, there is still HoPP and CoPP (mostly good off grade, some prime) that starts with a 4.
Read the full Market Update on the PlasticsExchange website.