Polypropylene (PP) demand was good and prices held firm, while unenthusiastic polyethylene (PE) buyers kept prices flat to lower last week, reports the PlasticsExchange in its Market Update.
Resin inventories throughout the supply chain generally remained very low, but there has been a slight improvement in the flow of railcar offerings. While completed PE volumes have been lackluster for several weeks at the PlasticsExchange trading desk, PP volumes continued strong with demand buoyed by processors still short of material. The resin industry is still catching up from supply disruptions caused by planned turnarounds, unexpected maintenance, and extended outages caused by the pair of hurricanes that impacted a key petrochemical producing region in Louisiana.
After a series of domestic price increases over a five-month period, October resin contract prices were mostly flat and it seems that at least an interim peak is now in place, according to the PlasticsExchange. Resin market sentiment has shifted from bullish to a cautious neutral, and prices mostly have come off $0.02 to 0.03/lb from their expanded spot premium levels. Still, many PE or PP grades remain scarce. Export business is still humming along, but well off the pace seen when prices were depressed into the summer.
The spot PE market continued to drag. At times, trading activity seemed slower than the vote counters, said the PlasticsExchange, and that uncertainty gave some buyers added reason to pause. Completed volumes scraped the lower end of average. Many market participants believe that softer prices lie ahead, but they still need material to run. Consequently, order size has shrunk, causing a weaker undertone to creep into the railcar market. At the same time, dwindling downstream inventories call for urgent deliveries and premiums for last-minute truckloads.
Even as sentiment has weakened, not all grades were amply supplied, including low density and linear low density for injection and high density for blow molding. Plan accordingly — the resin market does not move fast enough where waiting an extra couple of days to procure would provide a dramatically steeper discount. It is better to have resin to run, advises the PlasticsExchange.
Spot prices ended the week mixed, mostly because of pockets of tight resins. High-molecular-weight, low-density, and linear-low-density PE for film all lost a penny, while high-density blow molding and injection and low-density injection held flat. Scarce linear-low-density injection gained a penny.
Contract buyers are facing the same $0.05/lb increase nomination in November that failed to take hold last month, and few of them seem worried. Export interest was a tad on the quiet side this past week — a highly contested election can cause serious currency swings and many chose to sit this week out to observe.
PP trading remained strong last week, but activity was still somewhat slower than the previous two weeks, which saw extraordinary resin demand. Slightly growing supplies still found quick homes in the happy hands of buyers, monomer prices held steady, and PP prices ended the week flat but firm. Some PP buyers ordered another round of imported material to offset insufficient domestic supply, with deliveries extended out through the end of the year. Along with the imported co-polymer PP, the PlasticsExchange also transacted numerous railcars and truckloads of prime co-polymer PP and prime and off-grade homo-polymer PP.
While downed reactors have returned online, a heavy flow of off-grade resin has been hitting the market, suggesting that consistent prime production remains elusive. Since producers need to rebuild inventories, the market can continue very snug. PP production issues in the Far East coupled with very high ocean freight rates have triggered some renewed export demand from South American buyers. While US prime resin was cost prohibitive, off grade was within the price realm. There was a small $0.005/lb increase seen for October PGP with just the same cost-push bump for PP contracts. Producers will take another swing at a margin-expanding increase in November.
Read the full Market Update on the PlasticsExchange website.