Weekly resin report: Spot prices for commodity-grade PE reach decade-long lows

Spot resin trading continued to transact at a very swift pace last week: Buyers and sellers came to do business and both sides were willing to bend a bit to complete deals, reports the PlasticsExchange (Chicago) in its Market Update. Prices for nearly all polyethylene (PE) and polypropylene (PP) grades slid a cent, with very sharp pricing again seen for off-grade materials.

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Spot domestic demand remained strong and, despite trade wars and geopolitical uncertainty, July PE exports scored a new all-time record high. European inquiries were off this past week, as the traditional August holiday season took its toll; otherwise, incremental demand was met by willing supply. PE producers aim to recoup their June/July price decrease—or at least stem the slide—with a fresh September $0.04/lb nomination, which backs up the current $0.03/lb August attempt. It would take a disrupting hurricane to implement, writes the PlasticsExchange, but "heads up," it adds, "we are entering high season." August PP contracts should see little price change, as monomer has been stable while spot resin supplies are surprisingly available given tight upstream inventories. 

The spot PE market continued to transact at a healthy pace, though completed volumes fell a touch below the previous week’s tally. Spot prices eroded further and most commodity grades reached fresh decade-long lows, reported the PlasticsExchange. In general, these low price levels have been viewed as attractive, as processors continued to step up and buy in size. While much of the new PE production has been finding a home offshore, to the tune of a record 1.6 billion lb in July, upstream resin inventories continued to bulge to a new all-time record, exceeding 5.7 billion lb, which is 2 billion above July 2017 levels. The Houston packaging grid is feeling this heavy flow, as some warehouses are full and turning away packaging business for the moment. In addition to the $0.03/lb increase sought for August, PE producers have nominated a $0.04/lb increase for September, perhaps partially to limit the downside in prices and also in case of a hurricane-induced production disruption as we head toward peak storm season. 

PP trading marked the seventh straight week of robust business; completed volumes favored homo- over co-polymer PP and off-grade over prime. With limited movement in monomer costs and no new news of supply disruptions, homo- and co-polymer PP prices gave back an earlier spot penny increase. The cent premium had been added in the aftermath of the Exxon Baytown fire, even though it did not create a meaningful disruption to the market. Overall PP resin is amply available, though fiercer negotiations were required to consummate transactions last week. Producers appear to have run reactors in July at around 90% of capacity, domestic demand was strong and upstream inventory drew nearly 50 million lb, resulting in nearly decade-low levels. August PP contracts are on track to roll relatively flat.

Read the full Market Update on the PlasticsExchange website.

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