Weekly resin report: Processors tap into spot polyethylene market for substantial savings

Spot resin trading slowed just a touch but remained lively heading into the long Labor Day weekend, reports the PlasticsExchange (Chicago) in its Market Update. Commodity resin prices were mixed, as August, the best month of the year so far for the resin clearinghouse, came to a close. There were some aggressively discounted prime and off-grade railcars, month-end deals per se, that attracted processors and traders. Others swarmed to the spot market willing to pay a premium for quick shipments to fill in supply gaps as logistics delays mounted.

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Spot polyethylene (PE) prices ranged from up a cent to down a cent, depending on grade. Polypropylene (PP) prices edged a half-cent higher. PE contract prices should end flat to perhaps $0.03/lb lower for August; PP contracts were mostly steady. There are potential increases for both materials in September, with a $0.03/lb PE nomination and PGP monomer costs creeping higher. Resin exports remained robust and Houston warehouses have been slammed with orders, backing up some shipments. As we head into the heart of hurricane season, we are reminded that a major storm in the gulf could be very disruptive to the resin supply chain. The PlasticsExchange advises keeping adequate materials to serve as a sensible buffer. 

Capping a very active month, the spot PE market pumped the brakes a tad and coasted into the Labor Day holiday weekend. Still, completed volumes for the week were again above average and August volumes were the the highest since Hurricane Harvey in 2017, reports the PlasticsExchange. Processors continued to tap into the spot market, which has been very liquid and offers substantial savings compared with general contract levels. All high-density PE resins and linear-low-density PE film were down a full penny, as new reactors pump out these commodity resins. 

Low-density PE film was up at least a half cent, with a notable delay in new production. Both low-density PE and linear-low-density PE for injection gained a full penny, because of supply tightness in these slightly more specialty grades. 

PE contracts bucked the $0.03/lb increase and will likely settle flat. A decrease can be easily justified, according to the PlasticsExchange, given the massive discount that spot holds to contract. Producers will look to stem the slide in September and try again. A premium has developed for truckloads that are packaged and ready to go versus fresh railcars still to ship or slated to pack out at a later date. Houston area warehouses are slammed full and delays have become commonplace, as they struggle to deal with a tsunami of resin, mostly destined for export, that continues to flood into them. 

As has become the norm, the PlasticsExchange again experienced heightened spot PP trading, pushing August volumes to the highest of the year. A rush of end-of-the-month offers materialized with stellar pricing attached, and processors were ready with orders in hand. By the end of the week, unfilled demand remained, at least at the special pricing levels. Homo- and co-polymer PP gained a half-cent and could continue to tick higher, as spot PGP points to a modest September increase. As we enter a seasonally strong period of demand, it will be interesting to see if the apparent upstream resin supply tightness begins to impact spot availability, which has otherwise been quite good, writes the PlasticsExchange.

Read the full Market Update on the PlasticsExchange website.

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