There was a surge of spot resin activity the last week of September, with the PlasticsExchange (Chicago) reporting high completed volumes and mixed prices in its Market Update. September 30 marked the end of the week, month, quarter and, for some of us, the year (L’Shana Tovah!) The spot markets were generally difficult in September; only with significant effort were this month’s results ultimately very good. Large low-margin deals were complemented by sales of relatively low-cost inventory that the PlasticsExchange procured in July and August.
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Spot polyethylene (PE) demand improved as September drew toward a close. Prior month PE sales were super strong ahead of the September $0.05/lb price increase, which essentially borrowed from what would have been that month’s normal order flow under other circumstances. The heavy August shipments also thinned out supplier availability, which has only just now begun to improve. Export demand remained strong, particularly from Latin America, although relatively high Houston prices limited incremental sales.
PE producers secured their $0.05/lb increase in September; in the aftermath, prices for most commodity grades eased this past week. HDPE, primarily blowmolding and injection, softened amid better availability. LDPE and LLDPE film grades also slid a half-cent, as supplies also began to improve, but there are still pent-up orders to be filled. LDPE and LLDPE injection grades gave back a full cent, just part of the extra premium that it had recently built.
PlasticsExchange analysts expect both PE supply and demand to continue to improve in October and the variable timing of each should create good spot opportunities. Spot ethylene levels have quickly dropped about $0.08/lb, while contract PE prices added a nickel for healthy margin expansion. With neither a need nor concerted effort by PE producers to raise contracts further, spot PE prices, which have just softened a little, could ease back a bit more in the coming weeks.
Polypropylene (PP) producers implemented their price increase in September, which averaged around $0.04/lb, with some variance as a result of contract structures. September PGP contracts rose $0.06/lb to $0.43/lb, bringing the two-month total to $0.095/lb. PP contracts are now lagging a month and producers will try to raise resin contracts again in October to cover higher monomer costs.
Spot PP trading was again very good this past week. Despite cost-push pressures, production has remained robust and supplies have been plentiful, which led to softer spot pricing during the middle part of the month. Processors seemed happy for the discounts, which were particularly deep for off grade, and new orders began to flow heavily and continue through month’s end, reports the PlasticsExchange. This helped edge spot PP prices up a half-cent last week.
The stronger spot demand is starting to do a number on trader inventories, which had been very high as the market seemed ripe to rally. There are still ample supplies available, but with another contract price increase in play for October, there is the potential to see the spot market clean up a bit more. Prime PP railcars probably will be priced $0.05 to 0.06/lb higher in the beginning of the new month. That should make spot material in the high $0.40/lb and low $0.50/lb range appear to be a bargain.
Read the full Market Update on the PlasticsExchange website.