Weekly resin report: Processors wait it out in the expectation that lower prices are coming

Spot resin trading improved the week of June 13, but monthly transactional volumes still lagged below historical averages, reports the PlasticsExchange  (Chicago) in its Market Update. Processors generally have been limiting purchases in the expectation that lower prices are ahead. While overall prices for both polyethylene (PE) and polypropylene (PP) were soft, particularly off grade, generic prime mostly held steady this week.

Overall deal flow in the spot PE market is sporadic, but supplies of certain scarce materials, including LDPE for film and high-flow LLDPE, began to show to complete open orders. While there was a fairly steady flow of offers for traditional high-volume commodity PE resins, pricing was not compelling enough to interest processors other than for immediate and urgent needs.

Processors have been pushing for a price decrease, hoping to peel off the $0.04/lb increase that was implemented back in April. Anecdotally, many have minimized direct contract orders, opting to work down inventories in order to buy more patience, notes the PlasticsExchange. In the meantime, as downstream resin supplies thin, periodic delays in railcar shipments have created the need for urgent loads. Some resellers, perhaps expecting cheaper prices already to be prevalent, also appear to have taken orders on the come and require interim material.

PE producers seem intent on holding on to this price level through June. They seem to still be building inventories rather than inundating the market with an abundance of generic prime resin, which would knock the price. Incremental PE exports continue to be challenged, even as supplies start to back up in Houston and prices begin to slip.

The spot PP market was challenged by sluggish demand, led by ample supplies and expectations for still lower prices ahead. While resellers look to move their uncommitted imported resin stocks, producers have maintained high operating rates, thus keeping downward pricing pressure on the market. PP contracts have mostly declined $0.10/lb during the second quarter, with the second nickel decrease implemented in June. Spot prices continued to slide with a level of consolidation seen, as previous market leading prices have been matched by others.

Resellers have mostly imported copolymer and as those pockets of supply disappear, there is sometimes a price jump sticker shock for spot domestic CoPP material. In general, spot domestic PP homopolymer is much more available and cheaper than copolymer, providing some processors with unrealistic pricing expectations.

The HoPP market has become liquid again in Houston, as producers purge product destined for export, according to the PlasticsExchange. These export channels, which were relatively dormant for years, are being redeveloped to sell off fresh production and liquidate excess material to keep inventories from inflating further.

Read the full Market Update on the PlasticsExchange website.