There’s a kind of hush all over the . . . spot resin markets. The PlasticsExchange (Chicago) reports in its Market Update that completed volumes were below average last week, making it perhaps the slowest week of the year.
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After coming off a couple cents these past few weeks, spot polyethylene (PE) and polypropylene (PP) prices managed steady, but with a weak undertone. Market sentiment has been shifting toward negative amid falling energy/feedstock costs and weak international resin pricing. Supply chain resin inventories are really not burdensome, according to the PlasticsExchange, but muted trading can quickly start to back up material, particularly commodity grade PE. As long as export resin is flying off the shelf, it all works just fine, but given the expanded production capacity, any slowdown in sales can seem exacerbated. Processors that took a $0.03/lb PE contract increase in April and $0.045/lb PP increase in May would now like to see those increases come right back off. PP producers will pass through their pending June cost relief, and PE producers will likely just dig in and try to keep contracts flat. One more thing: The hurricane season officially began a couple weeks ago.
Overall spot PE trading and subsequent completed transactions were below average last week, as buyers worked through their inventories while waiting to see how June contract pricing shakes out. Although material was not offered to the market in huge quantities, enough resin was readily available to fill orders as they arrived. Spot prices were flat across the PlasticsExchange board this past week, but have already shed $0.02/lb from the little spring run up and surprising April $0.03/lb contract price increase. Another $0.03/lb price increase is nominated for June, but implementation is unlikely; in fact, many buyers are clamoring for a decrease. International resin markets have been dragged down by weak crude oil prices and barely buoyed by another attack on oil tankers in the Middle East. Although geopolitical tensions are high, cheaper resin prices have been seen in Europe and China. This market has quickly shifted toward bearish, but it is a nervous environment that can again change course with short notice.
Spot PP trading was about average, as processors came to fill in supply gaps. Still, it was nothing to write home about, writes the PlasticsExchange in its Market Update. Spot PP levels jumped a nickel from their March low and were flat this past week, but they have already eased back two cents in June. The flow of fresh offers was steady, more because of weak demand than over-supply, as upstream PP inventories are actually quite tight due to production complications and solid upstream draws. Still, PGP monomer costs have subsided, and since resin contracts have been following lock-step, June contracts should essentially reverse the May $0.045/lb increase. Though PP producers do not rely on exports for meaningful volume, offshore sales have grown to about 4% of total sales and overseas PP markets are now experiencing pressure from expanded worldwide capacity and softer costs.
Read the full Market Update on the PlasticsExchange website.