Weekly resin report: Spot PE prices could start to slip

The spot resin markets were a bit slower this past week, affected somewhat by the Columbus Day and Yom Kippur holidays, reports the PlasticsExchange (Chicago) in its Market Update. There was a limited number of fresh prime polyethylene (PE) and polypropylene (PP) railcar offers, but off-grade material continued to flow. Resellers, both in Houston and around the country, continued to make their prime warehoused inventories available, aiding spot market liquidity. PE prices were mildly mixed, with some premium adjustments seen between grades. Spot PP prices moved moderately higher. Export interest for both PE and PP remained stronger than during September, which had sagged. 

PE trading was notably lighter than it was during the past several weeks. There was a slight lull in producer offerings the week of Oct. 10, but not enough to alter market sentiment, which remains slightly negative from this price point. There was previously a good flurry of activity, as some processors had run their inventories down and had to restock. Resellers, commenting that September sales were disappointing and feeling that the market has become fully extended to the upside, have sought to sell off a portion of their uncommitted resin stocks. 

Houston traders and exporters are also seeking to pare down inventories, as offshore sales have been weaker than anticipated. Fairly priced buyer bids are being hit as a result. Although spot buying from international traders has recently been improving, PE exports disappointed in September, registering the lowest tally in 20 months. The resurgence in export demand will be critical in order to maintain a balanced market, as PE capacity expands and production increases. 

PlasticsExchange is currently seeing a wide range of PE prices, which creates good spot opportunities. Domestic prime railcar offers are holding at levels to include last month’s nickel increase, while the discount afforded on off-grade railcars is growing. After two months of reduced resin production, upstream PE inventories are relatively light, which has kept the market firm, even at this lofty level. Although some PE producers are still dealing with production constraints, now that the increase has been implemented, and cracker/reactor issues are resolving, spot prices could slip. However, PlasticsExchange analysts believe the recent nickel increase will remain intact this month. 

The PP market slowed from its active pace and trading volume was only considered about average. PP production was finally reduced in September, largely due to planned and unplanned reactor maintenance; we are just now starting to see a lighter flow of railcar material. While overall resin availability remains ample, processors continue to pick away at resellers’ aged inventories, which have been the lowest priced material in the market. As offers are purchased, reseller asking prices are lifted slightly higher; consequently, HoPP gained a half-cent this week, while CoPP was up a full penny. 

While the volume of material available in the spot market could not nearly satisfy contract demand, its relatively low price level is indicative of oversupply and weighs on buyers’ sentiments. This, in turn, affects processors’ inventory ideas and their short to mid-term demand. Spot PP supplies are again thinning and another month of reduced PP production, which appears to be occurring, could help tip the supply/demand balance back toward tight . . . or at least less loose. This would certainly help producers raise contract (and overall) prices again in October to help offset their $0.06/lb PGP monomer increase taken in September, which is still squeezing margins this month. 

Read the full Market Update on the PlasticsExchange website.