Weekly resin report: Spot pricing for commodity PE grades under pressure

Last week, the spot resin markets maintained the heightened level of activity that developed late in the previous week. Polyethylene (PE) prices were mostly lower, polypropylene (PP) was largely steady and transacted volumes moving across the PlasticsExchange (Chicago) trading desk were relatively high.

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The flow of offers was healthy, if not strong, as resellers apparently desired to move resin quickly, even on a quick flip, rather than taking on added inventory positions. PP contracts were up about $0.02/lb in August and are expected to see little change in September, perhaps down a cent, which is a slightly stronger stance than three to four weeks ago.

There is much confusion with regard to PE contracts, notwithstanding the index flip-flop by a major consultancy. The three-cent spot decrease seen for most grades versus most producers’ firm roll-over in August, resulted in some, but not all, contracts, indeed, being down. The lack of price transparency is reaching a new dynamic, with at least two PE producers recently sending letters reinforcing their intent to increase September contract prices by $0.03/lb and an additional $0.02 to 0.03/lb in September and October. OK, sure, writes the PlasticsExchange in its Market Update, but from what level?!?  

Spot PE trading was very good; had transactions been more widespread among grades, it might even have been categorized as robust. However, while low-density and linear-low-density PE, both film and injection grades, took the spotlight, high-density PE demand fizzled. Still, pricing for all commodity PE grades was under pressure, with typical losses ranging between $0.005 to 0.01/lb. Buyers were fairly active again, finding value in the cheaper resin, while some Southeast processors began filling short-term supply gaps caused by Hurricane Florence. While the initial purge of tariff-related surplus PE has already come and gone, the new lower price level seems to be more commonplace, at least in the Houston market. 

Early indications reveal that despite the Chinese tariffs, PE exports in August continued to grow to record levels, though timing/reporting could be a factor, according to the PlasticsExchange. Still, while August production continued its near-record output and upstream inventories built toward that magical five-billion-pound level, PE prices remained relatively resilient. Producers and processors continue to spar with regard to contract prices, and it seems that there were mixed results based on specific relationships and contract terms—some flat, some down. One thing is certain—deep discounts are available for spot material. 

The spot PP market was busier than the previous week, availability came in good spurts and the volume of transactions reported by the PlasticsExchange was above average. Deals were spread among the full gamut of commodity grades, including those normally deemed scarce.

Prime domestic railcars in the secondary market were generally priced $0.16 to 0.24/lb above monomer, depending on grade, which usually scared away buyers. The best deals were seen for near-prime and good off-grade materials; offered at least a nickel or even a dime lower, they were snapped up quickly. Rough, low-quality PP in Houston can be procured about a nickel above monomer. The PlasticsExchange reports seeing another, but smaller, wave of PP imports on the water, with pricing between domestic off-grade and prime levels. September PGP has been a tad volatile, but within range, pointing to little change for PP contracts. The PlasticsExchange remains modestly bullish on PP pricing. 

Read the full Market Update on the PlasticsExchange website.

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