After a couple of solid weeks, the spot resin markets took a breather, reports the PlasticsExchange in its Market Update. Polyethylene (PE) prices moved higher, stifling some demand, which was also hampered by social unrest and large gyrations in the equity and energy markets. There were occasions when customers, both processors and resellers, presented lowball, month-ago-level bids, claiming that there were competitive offers in the marketplace. But suppliers generally held their ground and, more often than not, buyers came back to pay the asking price, perhaps with a tiny price concession granted by sellers to make the transaction feel more friendly.
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Spot PE prices continued to snug up toward the inclusion of the $0.04/lb increase on the table for June. It’s about halfway there, so at the moment the full increase has about a 50% chance of success; if all things remain steady from here, it may land at just $0.02/lb, according to the PlasticsExchange.
PGP monomer costs edged higher, but polypropylene (PP) demand still languished, as many processing facilities, including a good part of the automotive sector, remained shut because of COVID-19. The export market remained hot even as PE asking prices have risen $0.02 to 0.04/lb. While most of the first round of June producer offerings sold quickly, some grades still remain at the higher end of the price range. PP exports have been a bright spot for that sector, soaking up some of the leftover supply from lackluster domestic demand.
The spot PE market pumped the brakes this past week, as activity was down and a slight hint of uncertainty crept into the resin market, perhaps some spillover from financial and other commodity markets. The PlasticsExchange trading desk finished the week with a below-average number of pounds traded, resembling volumes from earlier in the COVID crisis. It is sometimes healthy for the market to take a breather, as prices reversed sharply during this rebound, said the PlasticsExchange. Sellers were confident enough to stave off the lower bids, and in most cases were rewarded with sales at or near their asking prices. Fresh railcar availability was not necessarily tight, but some processors were in need of quick resin and paid up for spot truckloads, providing nice benefits to those suppliers who were bold enough to secure extra inventory — packed and ready to ship — well before it was clear that the market was turning higher.
Spot PE prices moved up another $0.005/lb across the board last week. Producers have been inching closer to securing their $0.04/lb price increase for June, and a strong export auction supported their cause. Initial May PE data show that demand was off slightly, topping 4.6 billion pounds, and inventories built an insignificant 25 million pounds. Considering all of the turmoil in the world, these numbers can still be viewed as strong. The PlasticsExchange said that its sentiment toward the PE market remains bullish.
Spot PP trading was fairly active. Completed transactions lagged, however, as manufacturing demand has yet to catch up with available supply. For the sixth week in a row, spot homo- and co-polymer PP prices settled flat, which is particularly notable since firming feedstock costs and still historically light but growing producer inventories have not been able to push spot prices off center. Material availability remained ample. Although fewer fresh railcars were offered, plenty of packaged truckloads were sufficient to satisfy prompt demand.
Recent preliminary data showed May production was on par with the trailing 12-month average. Sales were slightly higher than April, but still about 6.5% below the trailing 12 months. Exports were a highlight at 30 million pounds above average; however, it was not enough to offset the lack of domestic demand. Consequently, inventories added about 77 million pounds. This brought the three-month surplus to about 160 million pounds, but upstream inventories were still well below the 24-month trailing average and not too far from the lowest levels seen since the PlasticsExchange started tracking them more than 10 years ago.
Read the full Market Update on the PlasticsExchange website.