Weekly resin report: Shortage of materials puts price increases in play

Spot resin trading slowed noticeably last week as urgent demand eased, but prices maintained their lofty levels, reports the PlasticsExchange (Chicago) in its Market Update. Most grades held near steady and some consolidation was seen. Overall supplies of both polyethylene (PE) and polypropylene (PP) remain snug, with some grades spotty for immediate shipment.

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High-density polyethylene (HDPE) will continue to be very scarce, and the PlasticsExchange expects upward pressure for this segment to continue. Incremental prime PE exports were crimped this month because of limited availability and domestic sales opportunities. However, a large amount of rough re-start off grade and flood-contaminated resin is expected to be sent offshore. 

Although most resin plants that were affected by Hurricane Harvey are back online, some are still running at reduced rates. One particular complex with significant HDPE capacity will remain offline for an extended—but still undetermined—period of time, writes the PlasticsExchange in its weekly update. While several planned petrochemical complexes will face delays because of the hurricane, two brand new PE plants are now in startup mode. This is beginning to provide processors with a glimmer of hope for eventual relief from this hurricane-driven rally. In the meantime, the market is still short of material and there are a series of price increases in play. 

For comprehensive, timely updates on the storm’s impact on Houston-area petrochemical- and resin-producing complexes, check out the PetroChemWire website.

PE buying relaxed, and traded volumes receded from their swift clip; spot material was still in very short supply and prices remained elevated. Although producers’ post-hurricane operations have been ramping up, lost production has created a short- to mid-term supply and demand imbalance, which supports the current price increase effort. The $0.03/lb August price increase has already been fully implemented. Each PE producer has a $0.03/lb increase set for either September or Oct. 1, and at least four producers have targeted an additional $0.03/lb increase for Oct. 15. The PlasticsExchange believes that the $0.07/lb increase will take hold, with a good chance for a total of $0.10/lb. The increases will peel back some time in the future, according to the resins clearinghouse. 

Spot PP prices held steady after a sharp five-week rally, which had added a hefty $0.165/lb. These rapidly rising levels took spot from a discount to a premium, pushing some buyers to the sidelines, especially those processors just tapping resin from their lower cost August purchases. Still, these spot levels are a very good indication of what price the market can bear, adds the PlasticsExchange, and with a sizable PGP cost-push increase imminent, PP contracts can catch up quickly. “We expect a total increase in the vicinity of $0.10/lb to implement for PP contracts during August and September, attributing about $0.07/lb for monomer and $0.03/lb for margin” writes the PlasticsExchange.

Read the full Market Update on the PlasticsExchange website.

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