The commodity resin markets remained busy last week, according to the PlasticsExchange, as polypropylene (PP) buyers bought well-needed supply and polyethylene (PE) trading picked up the pace after a few weeks of lackluster demand. Prompt material availability was mixed, however: Fresh railcar offerings were sporadic, and while supplies for some resins have begun to improve, most commodity grades remained limited to super scarce. When tough-to-source materials did surface, processors snatched them up. Some of them still seemed to be backfilling requirements.
Many resellers have been working down inventories, preparing to pounce on typical end-of-year discount opportunities. As mid-November approaches and upstream supplies remain tight, however, some are voicing concern that a significant break in prices might not materialize. As such, sentiment improved: Overall resin prices were firm and some grades regained a penny of the two to three cents shed in previous weeks. PE producers technically are seeking to implement the $0.05/lb increase that did not take hold in October, but the PlasticsExchange writes in its Market Update that it has not seen a concerted effort to enforce it. PP contracts appear to be heading moderately higher in November, with a small cost-push increase and potential margin enhancement, adds the resin clearinghouse in its report.
Spot PE trading activity got quite busy last week, and some prices moved higher, bucking the minor weeks-long slide that developed amid overall negative market chatter after enduring $0.19/lb price increases. The PlasticsExchange notes that its trading desk strung together a steady flow of railcar and truckload transactions, breaking out of the recent short-term trend of below-average volumes.
After resin prices rallied to relatively dizzying heights during the third quarter, processors resisted the October price increase and opted instead to slow purchases and work down inventories. They were hoping to restock at cheaper levels during the latter half of the fourth quarter. Sellers, in turn, looking to keep their volumes up, trimmed margins to chase additional orders, creating some modest downward pricing pressure. Indeed, storm-shut reactors have returned and new capacity is coming online, which can eventually weigh on prices. In the meantime, some grades like LD Clarity, LL Hexene and Octene for film, and LD and LL for injection have been nearly impossible to find. As mid-November approached, some buyers found themselves with uncomfortably low resin stocks and started coming back to the market to procure material.
Though there is a nickel increase on the table for November, contracts probably will roll flat. While increased supply is expected in the coming weeks — upstream inventories swelled more than 200 million pounds in October — barring a national COVID-related shutdown, the PlasticsExchange believes producers are likely to keep the market tight, increasing exports, if necessary, to avoid a significant year-end price decline.
Modest PP price increase anticipated
Solid demand for PP met increasing supply last week, and a healthy volume of material changed hands at the PlasticsExchange trading desk. PP prices ended the week flat, but firm, as spot PGP costs moved higher, pointing to a modest November price increase. Truckload availability was better — there was a more liquid supply of both Prime and Off-grade homo-polymer PP in low- to mid-melt ranges, though high flow was mostly elusive. A steady supply of both Prime and Off-grade co-polymer PP came and went, as processors still had spot needs to satisfy. Higher flow co-polymer PP and No Breaks appeared and were gobbled up. Random Clarified was still absent from the spot market.
While PP imports have been hitting US shores, most have been pre-sold. More is coming, but some overseas production issues have slowed new offerings. US producers ran full throttle in October as reactors came back online, but the market was starved and ate up more than was produced, causing yet another large inventory draw. Producers’ collective PP inventories hit a new low in the 15-plus years that the PlasticsExchange has been tracking supply/demand fundamentals. As mentioned last week, with inventories so low, the spot market could remain tight for some time. Producers will opt to replenish inventories rather than sell excessive material as spot, which will also help them keep a grip on their coveted pricing power.
Read the full Market Update on the PlasticsExchange website.