Customer demand improved last week and buyers became more comfortable with the higher price level that has crept into the market, reports the PlasticsExchange in its Market Update. The overall spot market could no longer be characterized as loose, and some commodity grades were outright scarce. Spot levels continued to rise, as polyethylene (PE) gained a cent, on average, with some variance seen by grade. Spot PE prices now reflect most of the $0.04/lb June increase. Polypropylene (PP) prices added a cent for the first time in seven weeks, though little change, if any, is expected for June PP contracts.
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Export demand remained strong, as international energy and feedstock costs primarily derived from the crude oil stream continued to rise. That helped to lift the incremental Houston clearing price, but there was still a limit to what overseas buyers could or would pay. This continually growing export outlet for material has provided producers with an excellent channel to balance their production against variable domestic sales while keeping their operating rates relatively high, said the PlasticsExchange. The offshore strength, in turn, has further supported domestic market prices, which have been particularly helpful to restore margins while North American natural gas prices/integrated costs continued to languish.
The spot PE market chugged higher, as spring drew to a close. Completed volumes at the PlasticsExchange were a bit better than average, as the battle continued between sellers pushing prices higher and buyers coveting sharply discounted COVID-induced resin. There was a run on packaged truckloads for certain grades, including low-density PE for film and injection and high-density PE for film and blow molding. Resellers are buying in larger quantities as they recognize that the current trend is for higher pricing; processors have maintained a more conservative sourcing approach and, in some cases, are waiting until the very last minute to order. Producers appear confident with their $0.04/lb June increase and most have nominated another nickel for July. In the meantime, there were still some fresh railcars available at the “plus 4” number.
The export market remained hot. However, most producers have already sold out their export allocations for the month. Traders that took positions have been selling off some supply and have generally been getting their moderately higher asking prices. Houston is becoming backed up and packaging warehouses are getting filled as outgoing container space is limited. The PlasticsExchange reminds readers that it has been bullish on PE and anticipates additional strength ahead.
PP trading returned to a more typical pace, and completed volumes ran right around average. Customer demand was more widespread, which was encouraging, writes the PlasticsExchange. Of the completed deals, co-polymer sold more than homo-polymer PP, Prime was favored over Widespec, processors joined resellers as solid buyers, and volume still favored truckloads over railcars. After six weeks of flat pricing, PP resins added a cent. The supply overhang had been cleaning up and some grades such as Random Clarified and Prime high flow co-polymer PP were outright hard to source. Slowly rising feedstock costs could no longer be ignored and resellers bought a bit extra for inventory. With excess supply cleaning up and prices moving a tad higher, the PlasticsExchange anticipates further tightening and maintains a somewhat bullish view on the market from this level.
Read the full Market Update on the PlasticsExchange website.