The flow of spot offers in the resin marketplace increased substantially last week. While a high volume of resin changed hands, much of the material simply accumulated and is currently still around, reports the PlasticsExchange (Chicago) in its Market Update.
True to form, the majority of transactions involved polyethylene (PE). Although some grades are still tight, overall availability has swelled to the highest level of the year. Despite at least one or two producers reiterating their intent to implement their thrice-failed $0.03/lb PE increase, the PlasticsExchange believes that PE contracts will roll flat, at best, in June. PE was steady to lower this past week, and film grades, which became more accessible, lost as much as two cents.
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Spot polypropylene (PP) improved, and while there was a soft undertone, prices managed to hold steady. PP contracts will follow PGP contracts higher in June, with perhaps an added bump attributed to margin enhancement.
The PE supply situation has improved with better availability seen for previously snug resins, such as low-density and high-molecular-weight PE for film, sending some spot prices down by as much as $0.02/lb. This week, which marks the end of the month, quarter and first half of 2018, is expected be a busy one.
Perhaps there will be an added boost from processors looking to secure material ahead of the Fourth of July. The massive logistics challenges that the industry has seen will be exacerbated by short-staffed offices and warehouses and truckers primarily looking for lanes that bring them close to home, adding to an already difficult freight environment.
In the contract market, some producers reaffirmed their intent to raise PE $0.03/lb in June; however, spot market pricing does not support the increase. Perhaps the timely letters were issued as an attempt to simply hold the market flat rather than acquiesce to a decrease, for which many downstream processors have been clamoring, writes the PlasticsExchange.
Spot PP trading was good, but it was off the rampant pace seen in recent weeks. With spot monomer easing the upward cost-push ahead in July, processors seem content to procure minimal quantities and wait for relief, unless immediate needs arise. In the meantime, resellers stocked with packaged inventory are still doling out material at top dollar when the orders come in.
On the supply side, offers were plentiful but levels were still elevated—a better flow of mostly off-grade railcars pelted the secondary market, and prices were a nervous steady to lower. Resellers also have prime railcars to sell at seemingly high prices, which is a good indication that demand has fallen short of forecasts. Since PGP monomer for the second half of 2018 is now priced well below prompt levels, PP importers will think twice about bringing in large quantities of speculative resin without orders in hand, according to the PlasticsExchange. If so, this could potentially lead to another supply/demand imbalance in the late summer and early autumn.
Read the full Market Update on the PlasticsExchange website.