A high volume of material changed hands last week, reports the PlasticsExchange (Chicago) in its Market Update. Supply improved and railcars came and went in groups, as buyers were eager to procure material. Sales favored railcars over truckloads and prime more so than off grade, and buyers still sought more as the week came to a close. Export demand was excellent and bids moved higher, lending support to the domestic market.
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While prime commodity polyethylene (PE) and polypropylene (PP) resin prices appeared flat, the market was strong and firmly consolidated to the topside of the $0.03/lb average gain that spot earned over the last six weeks. Buyers paid up and absorbed the early 2020 bump in pricing, but also showed strong resistance to more movement; hence, no additional advancement was reported in the PlasticsExchange’s benchmarks last week. There is good momentum for prices to continue to move higher, however, as long as there is no new market shock or major acceleration in the spread of the coronavirus, which has already begun to threaten the Chinese and global economies.
It was a very good week to trade polyethylene, according to the PlasticsExchange. The flow of offers improved, albeit at higher prices, and transactions came together at a fairly rapid rate. Completed volumes were well above the 2019 average, as a smattering of fresh railcar offers were finally shown to the spot market, satisfying some pent-up demand. Low-density PE for film and other more specialty linear-low-density PE grades were still tight amid ongoing production issues, which boosted activity for spot truckloads requiring immediate shipment. High-density PE resins were amply available.
Spot PE deals generally consolidated at the higher end of the recent price range, as the marketplace worked to digest the January $0.04/lb increase, which was finalized in early February. There is another $0.05/lb contract increase on the table, but a $0.09/lb jump seems unpalatable at this time, writes the PlasticsExchange. Suppliers began pushing for the additional gains, but there was plenty of pushback from buyers, citing the need to first move the $0.04/lb increase downstream, which is a stark change in light of the longer-term downtrend. Other processors were still happy to work off their sharp December purchases, choosing to wait and see before paying up for more material.
PP trading picked right back up after a somewhat slower stint to start the month, which had mostly been caused by a lack of supply. Availability improved a touch this past week, but was still considered to be fairly tight after the sizable purge seen during the second half of January. The flow of domestic railcars resumed, both prime and off grade, and those priced just a penny or two higher were scooped up in a heartbeat. Sellers asking for more saw buyers quickly turn away. PP export demand and pricing remained notably strong, providing an additional outlet and competing for supply. The week ended with supply thinning from strong sales and buyers still seeking more material.
While PP resin prices and PGP monomer costs are well related, they have begun to decouple from the absolute lock step that had persisted for years. This change was apparent these last few months when resin prices fell more than monomer and we are now starting to see this pricing trend reverse as producers begin to regain a sense of pricing power, notes the PlasticsExchange. February PGP monomer contracts settled down a cent to $0.32/lb last week while the spot PP resin market firmed further. Producers have been slowly raising asking prices seemingly to help enable an official $0.03 to 0.04/lb margin increase slated for March. Considering that PP prices got overdone to the downside, while recent turnarounds and supply-chain issues have limited production and resin inventories, the PlasticsExchange believes the increase has some merit and views the market with a bullish perspective.
Read the full Market Update on the PlasticsExchange website.