Judging solely by trading activity in the resin market, it would appear that our economy is taking strong steps to put COVID-19 behind us, as a recovery is in full swing. The flow of offers remained reduced and prices for polyethylene (PE) moved higher, while polypropylene (PP) held steady last week, according to the PlasticsExchange.
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Strong demand from processors, domestic resellers, and exporters alike competed for the limited spot PE availability, which was relatively scarce as the month began with a price increase on the table. There was no issue getting contracted PE material at the full $0.04/lb, but opportunities were limited for buyers searching for spot deals priced lower than the increase — they had to be secured quickly before someone else grabbed the material, reported the PlasticsExchange in its weekly Market Update.
How quickly a market can change: Just a month ago, the resin market was essentially still in free fall, as buyers backed away amid the throes of the pandemic and widespread shutdowns. However, it didn’t take long for pricing power to transition away from buyers back into the hands of producers, as strong exports and reduced production shoved available supply under returning demand. The dynamic was aided by a rapidly recovering oil market, which lifted international resin prices and the corresponding floor level needed to clear incremental resin sales out of Houston. The market has really heated up. Will it stay hot even as prices rise?
The spot PE market began June in impressive fashion, as upward price momentum drove a flurry of activity. The PlasticsExchange said that its trading desk was very busy all week, quoting and closing deals with a better than average volume of transactions completed. Resellers were very active buyers: Realizing that prices were heading north, they sought well-priced resin to add to their inventories. Overall availability was pretty good, but it came at a higher price tag. Spot prices showed movement throughout the week, with most grades gaining a half cent each on Monday and Tuesday of last week; low-density PE and linear-low-density PE Injection both gained an extra half cent on Friday, bringing their weekly gains to $0.015/lb. LD Clarity, which had been very difficult to source, actually shed a half penny on Monday but quickly recouped it to end the week flat.
Producers will continue to push to regain their April $0.04/lb contract decrease. While some buyers have quickly dismissed the notion, those on the supply side are gaining confidence in the increase. The export market continued red hot, helped along by rising crude oil and the weakening dollar. Tropical Depression Cristobal was our first taste of hurricane season, causing some flooding through the Southeast, but it avoided the petrochemical section of the Gulf. Overall, the PE market feels strong with a bullish tone heading into the summer months.
Spot PP trading improved, but not to the extent seen with PE. Buyers and sellers looked for opportunities, and while the PlasticsExchange trading desk completed an average volume of business, activity was muted. Of the completed transactions, Prime outsold wide spec, co-polymer PP moved more than homo-polymer PP, and truckload volumes were favored over railcars. Homo- and co-polymer PP prices finished flat for the fifth week in a row, as very steady feedstock costs have left the PP market directionless. Rapidly recovering oil prices, if sustained, could soon lend support to both domestic monomer costs and international PP prices. In the meantime, fewer fresh railcars have been offered on the spot market; overall supply seems adequate, however, as good truckloads are available.
The PlasticsExchange expects PP activity to pick up as more processing plants return online and the auto industry re-boots. PP contracts rolled flat in May and little change is expected the rest of this month.
Read the full Market Update on the PlasticsExchange website.