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Weekly resin report: Processors stunned by surging spot PP prices

Weekly resin report: Processors stunned by surging spot PP prices

Spot polypropylene (PP) prices have jumped about a dime since early December, sending processors into price shock. The higher costs could endure for months.

Spot resin trading was consistent the week of Jan. 16, writes the PlasticsExchange (Chicago) in its Market Update, reporting that a steady flow of buyer and seller interest brought a slightly better than average volume of completed transactions. Polyethylene (PE) prices were mostly steady, consolidating the $0.03 to 0.05/lb of gains seen since the beginning of December. Spot polypropylene (PP) prices edged another cent higher, bringing the rally since early December to $0.10/lb. Resin exports should be tempered by rising U.S. pricing and the Chinese New Year beginning at the end of this month. The lull could give Houston-area warehouses a chance to catch up packaging railcars, as some are still turning away business for lack of capacity. 

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The monomer markets were very busy and prices continued to soar. Ethylene prices added about $0.04/lb to $0.345/lb, a price that has not been seen since early October, according to the PlasticsExchange. PGP rallied further, adding almost $0.04/lb to nearly $0.49/lb. December PGP contracts were priced at $.315/lb, so expect a huge jump for January. 

The PE market was active, with film grades in particular demand. Supplies of HDPE resins have tightened up and there is very little LDPE Clarity to be found. PE prices were mostly steady on average, having already run up a couple cents in January. The bottom of the market has lifted, and there are very few cheap offers out there that would be considered a steal. 

January PE contracts should be flat, although some that received a $0.02/lb decrease in December might see that relief evaporate. Spot PE prices were well discounted to contracts, but have now closed the gap, which lends some support to the upcoming $0.05/lb price increase nominated for February. Nova Chemical’s new LLDPE reactor is now producing prime film grade material (read the article in PlasticsToday); it is the first of a half-dozen major resin projects expected to go live in 2017. 

The PP market seemed busy and there was a lot of window shopping, but transacted volumes were below average, notes the PlasticsExchange. Barely any fresh railcars were offered this past week, and while traders and resellers are fairly well stocked with inventory, asking prices are quickly rising to their (expected) replacement costs. Spot PGP monomer costs have skyrocketed, having risen 63% to almost $0.49/lb since mid-December. Although prices for most PP contracts are no longer officially or perfectly correlated with monomer, some producers, seeking to pass though their rapidly rising costs, are looking to raise PP contracts by the commensurate jump in PGP costs, which have yet to settle for January. 

Spot PP prices have so far surged about a dime since early December and processors are already facing price shock at this level. Some had loaded up at the now-gone historically low prices, but most processors do not have heavy resin stocks on hand and this does not seem like a quick blip. The forward monomer market indicates that these higher costs could endure for months. Although a flurry of PP imports is expected to start hitting the shores in February, the PlasticsExchange thinks there is still more upside ahead for PP before it peaks. 

Read the full Market Update on the PlasticsExchange website.

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