After a couple of busy weeks, has the spot resin market hit a summer slump? The pace of completed transactions and associated volumes fell below average last week, reports the PlasticsExchange (Chicago) in its Market Update.
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Completed deals were well-distributed among commodity resins, the bulk of which were focused in film grades. Polyethylene (PE) prices were, at a minimum, steady, and most grades moved higher. Polypropylene (PP) gained a cent amid spotty availability. Producers continue to pursue the August price increases that we have reported on in past weeks: They are seeking a $0.03/lb rise for PE and are looking to advance PP by at least the same amount. Resin exports out of Houston seem to be improving, with good demand coming from Latin America, according to the PlasticsExchange. Resin requests from Asia also have been flowing in, spurred by rapidly rising monomer costs, but general resin price expectations remain below workable levels for high-volume incremental sales.
In a lackluster PE market, spot demand was off, completed volumes were disappointing and, yet, prices remained mostly higher. In anticipation of forthcoming new supply planned to begin this quarter, resellers have sought to pare back their uncommitted inventory levels. This de-stocking effort has left certain segments short of material, with some supply gaps emerging. Urgent needs have prompted some buyers to pay up for resin, lifting spot levels as pockets of the lowest-priced materials sell and are replaced by higher next-best offers.
This moderate spot tightness has further encouraged producers to maintain their intent to implement their current $0.03/lb price increase on August PE contracts. While upstream PE inventories appear very heavy, some of the resin is earmarked to fulfill forecast contract sales during planned near-term plant maintenance. Although over-arching supply/demand dynamics do not necessarily support a price increase, there are whispers indicating possible delays in the aforementioned new production. Stranger things have happened, comments the PlasticsExchange, which adds that it is generally a little early on market timing and remains neutral at best, with thoughts of some softness ahead.
PP trading was fairly consistent last week, with meaningful buy orders trickling in. While there was a good flow of off-grade railcars, fresh prime availability was somewhat limited. PP prices added a penny, as monomer costs continued to climb to a level that now supports a $0.02/lb cost-push price increase. In addition to any change in monomer costs, PP producers are also looking to expand margins by about $0.03/lb.
In anticipation of at least some of the increases taking hold, the reseller community stocked up a bit on material. With underlying monomer support and relatively tight PP resin supply/demand dynamics, sellers are confident in their position and unwilling to compromise much on price. More often than not, writes the PlasticsExchange, it is seeing buyers blink first and acquiesce by paying the asking price for the material. Despite heavy resin production levels, the PlasticsExchange maintains a moderately bullish perspective on the PP market.
Read the full Market Update on the PlasticsExchange website.