Strong demand and substantial completed volumes in the spot resin markets last week led to inevitable rising prices as supplies thinned, reports the PlasticsExchange in its Market Update. The week began with producers issuing a new nickel increase for September polyethylene (PE) contracts, lending support to the $0.05/lb increase pending for August, which will probably be implemented. In addition to the imminent August cost-push polypropylene (PP) increase, which is hovering at $0.04/lb, another major producer joined the $0.03/lb hike for September PP contracts, which is in addition to any change in monomer costs. The new nominations sent buyers to the spot market seeking to procure additional resin at still fairly good prices.
The action continued throughout the week, according to the PlasticsExchange: POs were large and, as offers cleared, they were replaced with limited material priced $0.01 to 0.02/lb higher. International resin buyers probed the market for well-priced resin, but with short supply and strong domestic demand, they often came up empty handed. On Friday, there was an ominous hurricane warning as two major storms, Marco and Laura, were developing in the Gulf of Mexico, potentially impacting the petrochemical producing area in the coming week. Such a simultaneous hurricane hit would be unprecedented in the region. That prompted another wave of resin buying; most suppliers reacted by raising prices or outright pulling their offers to wait and see what would transpire in the days ahead.
Spot PE prices could soar if storms cause long-term production issues
Spot PE continued to transact at a rapid rate and prices moved up $0.01 to 0.02/lb, as railcars were snatched up and reseller inventories dwindled. The enthusiastic trade was spurred along by bullish factors, including a new $0.05/lb price increase announced for September and the double-barreled threat of a pair of developing hurricanes in the Gulf that could further disrupt an already tightly supplied resin market. These two factors should help solidify the August nickel increase; if so, $0.14/lb will have been implemented between June and August. Though weary from the increases, processor demand was robust and completed volumes were considerably above average for the second straight week at the PlasticsExchange trading desk. Hurricanes Marco and Laura are both dangerously close to Gulf Coast petrochemical complexes and such storms have proven to be unpredictable. No precautionary shut downs have been announced at the time of writing, but should either cause any long-term production issues, we can expect implementation of a fourth increase and spot prices to soar.
PP trading was very strong, marking its sixth straight vibrant week. Demand from both processors and resellers was heavy, and supply tightened further with some grades becoming outright scarce because of continued monomer and resin production disruptions. PGP prices ended the week flat with a nervously bullish undertone as participants eyed the developing storms that could potentially disrupt more monomer and resin plants. With real hurricane worries entering the equation, buyers scooped up PP material to maintain continuity of supply, sending spot resin prices up another $0.03/lb. Demand for high-flow homo- and co-polymer PP is always in fashion, but this week low-flow homo-polymer PP also joined the action. August PGP contracts should settle up $0.03 to 0.05/lb, and every bit of the increase will pass through downstream to resin buyers, according to the PlasticsExchange. Producers are also seeking an additional $0.03/lb to help restore previously eroded margins — some are targeting the enhancement in August, while others are waiting until September. The PlasticsExchange maintains a bullish outlook for the market, noting that it is well aware that a new world-class PP plant will eventually bring new supply to the market later this year. In the meantime, producer inventories remain tight and plants are still in turnaround or in force majeure.
Read the full Market Update on the PlasticsExchange website.