So, how busy were the spot resin markets last week? Well, at mid-month, resin trading was nearly double the historic average, reports the PlasticsExchange (Chicago) in its Market Update. Polypropylene (PP) prices inched up another cent while polyethylene (PE) prices held firm, having consolidated recent gains at slightly elevated recovery levels.
 |
| Image courtesy Cool Design/ freedigitalphotos.net. |
With the April PE price increase intact, producers have maintained upward pressure on the market—another $0.03/lb hike is on the table for May. PP resin contracts should increase in concert with the imminent jump in PGP contracts and should rise in the vicinity of a nickel or more. While both domestic and export resin demand remains very good, continued trade-war sparring has added a level of anxiety to the international market. Consequently, Chinese demand and prices have fallen off a bit, creating the potential for softer Houston pricing. Moreover, additional new production is slated to come online over the next few months in the United States. Conversely, crude oil has bounced back from the $60/bbl level, which provides underlying cost support to overall resin pricing.
Processors have been tapping the spot PE market, searching for relative deals compared with rising contract prices. Few think that the current May $0.03/lb increase will take hold; then again, not many believed the last $0.03/lb increase would have been implemented in April, cautions the PlasticsExchange. Overall supply is ample at a minimum, but there are certain grades that have become difficult to source, including low-density PE film grades and linear-low-density PE for injection—both are starting to earn small premiums compared to other commodity PE resins. Downstream inventories remain below average, with some processors banking on another surge of resin supply to send the market lower again. However, others are viewing current costs as very favorable, with limited, if any, downside, and some processors have been slowly adding to on-hand inventories.
PP buyers continue to access the spot market as they face a large jump in May contracts. The increase should be in the $0.05 to 0.07/lb range. The break in PP prices during the first quarter limited speculative PP imports, and the PlasticsExchange reports seeing very little surplus packaged material available. Spot prime domestic railcars are also fairly scarce and seem to be priced with an extra little bump considered, as some suppliers feel out the potential for a slight margin expansion. Still, many processors have pushed back against rapidly rising PP prices. Armed with some patience, they have been able to negotiate more favorable deals. We have a true and liquid market environment in play, notes the PlasticsExchange.
Read the full Market Update on the PlasticsExchange website.
