Weekly resin report: Processors tap spot market for good deals

The spot resin markets remained active last week, with the flow of deals nearly constant during the first part of the week, only slowing a bit by Friday, reports the PlasticsExchange (Chicago) in its Market Update.

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While there was good interest in both polyethylene (PE) and polypropylene (PP), completed volumes were heavily skewed in favor of PE. Buyers, faced with higher producer asking prices and the growing possibility of another increase in October, tapped the spot market for relatively good deals. Though there are still mostly ample supplies of material to be had and some nice deals around, the lower end of the price range for available material has been cleaning up, according to the PlasticsExchange. Spot PP demand has waned a bit as prices have been fairly flat; barring a major outage, buyers have little reason to fear a monomer-driven price increase. Still, overall PP supplies are categorically tight, only helped to balance by strong imports that fill much of the supply gap. 

The spot PE market continued its super busy pace, as October moved to mid-month. The PlasticsExchange reports that its transacted volumes were well above average. Spot PE prices ranged from down a full penny for low-density (LD) injection to up a half-cent for LD and linear-low-density film grades, but the overall sentiment is slightly bullish. While the previous week was dominated by trader-to-trader activity, this past week saw more processors re-join the market to scoop up any remaining resin that was still being priced flat to slightly higher than late September values. Producers have nominated an October contract price increase ranging from $0.02 to 0.04/lb, though it’s still too early to make a call on the likelihood of timely implementation. We are still in the thick of hurricane season and fortunately the Houston grid has avoided a major weather-related disruption. It’s certainly worth keeping an eye out, though, as both the Gulf and Atlantic shores have been hit with massive storms these past few weeks. 

In September, PE export volumes pulled back for the first time in seven months, but have still been surprisingly resilient in the face of Chinese tariffs. Even at September’s lower export tally of 1.15 billion pounds, which was about 130 million pounds below the all-time record set in August, exports have ratcheted up to a new norm, writes the PlasticsExchange. This new level, which should continue to grow despite trade conflicts, has been planned and heavily relied upon to offset the increases in PE production. However, producers also showed their willingness to throttle back reactors to maintain a position of pricing power. Operating rates were reduced significantly in September, leading to a rare upstream resin inventory draw of nearly 142 million pounds. Even so, Houston area warehouses are still bulging with material and packaging delays have become commonplace. 

Spot PP trading was somewhat lackluster—spot prices rose a penny while completed volumes slid below average. As we have seen in months past, early Prime railcar offers have been priced on the high side, as resellers seek to maximize opportunities given their limited resin availability. Better deals have appeared late in the second half of the month. The flow of packaged off-grade homo- and co-polymer PP in Houston has been fairly constant and well-priced, with good high-flow material moving quickly. The impact of current production issues has also surfaced: PP production has dipped below domestic demand for the second month in a row, leading to another upstream inventory draw, now the lowest in a full year. Processors that rely on certain producers with limited current availability have instead successfully engaged the spot market for supply. Some processors seem to be less aggressive with their purchases as PGP monomer prices slowly tick lower, which relieves the fear of another upward spike in prices. Still, if production issues persist and the supply/demand dynamic tightens further, producers might soon seek another outright margin increase.

Read the full Market Update on the PlasticsExchange website.

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