Spot resin trading got off to a roaring start in December, a reversal from a mostly lethargic November, reports the PlasticsExchange in its Market Update. Buying surged even before the calendar turned, with heavy volumes changing hands on the last day of November, resulting in the resin clearinghouse’s best day of the month. Activity continued at a high pace all of last week, as monomer prices soared and extraordinary export demand competed for spot resin supplies. That brought domestic processors to the table to secure reasonably priced resin, as available. By the end of the week, polypropylene (PP) prices had jumped a huge $0.05/lb, while polyethylene (PE) tacked on $0.01 to 0.02/lb. There is seemingly more upside ahead for both.
The PE nickel increase came back to life, while PP contracts are likely to jump quite a bit more as current monomer levels suggest that a cost-push dime could even be at hand, according to the PlasticsExchange. Year-end inventory balancing could be tricky, and markets tend to get volatile before much of the industry packs up early for a holiday break. Processors and resellers are both relatively light on resin stocks, so demand that had been waiting below the market has been brought to the forefront.
The spot PE market bucked somewhat negative sentiment and began to re-surge, proving how dynamic and resilient PE has become. The PlasticsExchange has been suggesting for the past couple of weeks that the typical December specials might not materialize this year and it was not prudent to wait to restock. Strong export orders crowded out low-ball domestic bids, sending prices one to two cents higher in active trading. For those hoping for major price relief, it seemed that another round of new US production would finally come in this fourth quarter, coinciding with the return of reactors that had been sent offline by hurricanes. Taken together, the thinking was that the surge in supply would help unwind some of the $0.19/lb price increases implemented since June. While the market did see some softness in November, further delays in new production have occurred and tremendous Chinese/Asian demand has come in the last two weeks to turn the market higher again. Adding to already tight supply/demand dynamics, the huge 2.2 billion pound per year Braskem Idesa PE plant shut down because of ethane supply issues, seemingly quashing hope for December price relief. This caught many buyers off guard, as they expected to restock around this time when the market typically eases. Producers have leveraged this strong export demand as an opportunity to liquidate their increased inventories that developed in October and November into the export market instead of discounting resin to domestic buyers. Whether the renewed upward momentum will be strong enough to bring the current $0.05/lb increase to fruition remains to be seen. In the meantime, the PlasticsExchange suggests procuring resin in December, as needed. Early January supplies could be challenging to secure and likely at levels higher than these.
The spot PP market was very busy, and prices soared. PP supplies remained incredibly tight: Fresh off-grade railcars came and went at ever-rising prices, while resellers provided limited Prime liquidity from their warehoused resins. Buyers became even more aggressive midweek, as PGP monomer prices jumped and pointed to a huge December PP contract increase on the horizon. Spot prices tacked on a penny each day of the week, as offers cleared and new supplies were sourced at increasingly higher levels. Old offerings at previously unreachable prices found buyers. Even relatively undesirable material found buyers willing to make it work. There was demand for all grades of homo- and co-polymer PP; transactions were dictated by availability. Not all processors participated in the feeding frenzy — some have ample material from contracted supplies while others chose to sit this last leg out because passing through these rapidly rising resin costs will surely damage their downstream demand. Export demand from Latin America and Asia added fuel to the fire, aided by a weakening US dollar. "Our bias remains bullish but cautious," writes the PlasticsExchange, "given the dizzying price rise."
Read the full Market Update on the PlasticsExchange website.