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Weekly Resin Report: Spot Materials Remain Scarce

Processors scrambled to secure material to fill supply gaps, add to inventory as a buffer against additional supply-chain disruptions, and as a pre-buy for fear of even higher resin prices ahead.

The spot resin markets maintained the momentum of the past couple of months and continued to transact at a very rapid rate, reports the PlasticsExchange in its Market Update. Last week perhaps was the busiest of all, as the industry braced as Hurricane Delta barreled toward Louisiana near the Texas border. Processors scrambled to secure material for various reasons, including to fill supply gaps caused by already tight supplies, add to inventory as a buffer against additional supply-chain disruptions, and as a pre-buy for fear of even higher resin prices ahead.

While spot materials were generally scarce, particularly polypropylene (PP), completed volumes ran high at the PlasticsExchange desk with availability trumping price and sometimes quality. Polyethylene (PE) prices continued to hold but did not advance further — spot prices consolidated on the higher side of recent ranges and producers eyed their fifth straight monthly price increase. Spot PP prices jumped another $0.02/lb, as availability essentially dried up and suppliers with some inventory to spare commanded — and received — their ever-rising asking price. Incremental PE exports resumed, as light initial October offerings were quickly scooped up. Only low-end and startup PP railcars sold export. 

The spot PE market remained very active last week. Completed volumes were high and deals were spread among all commodity grades while prices hung flat, but firm, for the second week in a row. Transactions came together rather seamlessly with back-to-back railcar orders nicely matched by strong sales for immediate pickup from market-making inventory at the PlasticsExchange. At times, a flat market has caused volumes to dip, but in this environment, narrowing spreads and improved price discovery have helped buyers procure with more confidence. Processors continue to buy, as needed, and throughput demand remains strong, although it seems that the top-end of this market cycle is nigh.

PE contracts have risen $0.19/lb since June, and while it’s too early to make a solid call on the nickel increase slated for October, the spot market has started feeling a bit tired. The overall supply/demand dynamic remains tight, however, and severe weather could still be a wild card. Hurricane Delta has targeted the same area as Hurricane Laura did some six weeks ago; if serious damage is incurred, additional disruptions could further perpetuate this PE rally. The PlasticsExchange has been quite bullish on PE prices since June, but has recently taken a more neutral tone as the rally runs its course.

Spot PP resin prices rise

Spot demand for PP increased, as buyers faced insufficient supplies caused by continued production disruptions exacerbated by Hurricane Delta. Spot prices for both homo- and co-polymer PP rose another two cents, and completed deals were only hampered by the outright lack of available material. The majority of deals that were completed involved low-mid melt Prime and wide-spec homo-polymer PP, mid-melt co-polymer PP, and Random Clarified resins. Some high-priced off-grade railcars came and went in a heartbeat, adds the PlasticsExchange. High-flow impact co-polymer PP resin would have been the biggest mover, had it been available.

As mentioned in last week’s report, the PlasticsExchange has shifted its sentiment from bullish to more neutral, as it observes demand destruction and believes that the top end of the pricing spectrum will evaporate when supplies improve. In the meantime, the resin market is still very tight and buyers in need will continue to pay up for material.

Read the full Market Update on the PlasticsExchange website.

TAGS: Materials
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