Weekly resin report: Spot resin markets roused from holiday slumber

The 2019 trading year has officially begun! The spot resin markets woke up last week with a start: By mid-week, completed volumes were more than double their averages, reported the PlasticsExchange (Chicago) in its Market Update.

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After a few weeks of minimal buying, spot resin demand returned with a vengeance. Processors had drawn down their inventories as the year drew to a close and needed to buy, while resellers were waiting for railcars to pack out and required material for immediate shipment to their customers. Packaging delays are being seen in the Houston area, according to the PlasticsExchange, as warehouses fall behind and cars start to pile up. A wide range of prices were quoted, as participants shuffled in after the holidays. By the end of the week, some price consolidation emerged, mostly a penny lower, amid an air of mixed market sentiment.

The spot polyethylene (PE) market came alive in the first full trading week of 2019. Completed volumes were quite strong, as buyers returned from their extended breaks to find their silos a bit bare, requiring resin. Some orders were for urgent and immediate truckload delivery; others were larger than typical—multiple railcars—recognizing the smart value in current pricing. In a tale of two sentiments, other manufacturers reported that processing throughput was still slower than usual and continued to delay their restocking. January is often a bullish month, but the PlasticsExchange reports that prices were mixed last week, ranging from flat for low-density film and linear-low-density PE injection to down $0.02/lb for high molecular weight material.

In December, upstream PE inventories continued to swell, adding another 317 million pounds to enter 2019 with a massive collective stock of 5.36 billion pounds. Some justify these rising inventories as necessary to support higher ongoing sales. Resin reactors continued to run at a high rate, operating full throttle. This build is despite total sales increasing nearly 140 million pounds over November. The elevated sales figure was mainly due to producers exporting nearly 1.46 billion pounds of PE, which comprised a record 36.5% of total sales.

PE producers acquiesced to customer and consultancy calls for a December price decrease, doubling up fourth quarter relief to now $0.06/lb, writes the PlasticsExchange. But before you go out and splurge spend this holiday bonus, note that Scrooge also laid ground to swipe it right back: Producers have nominated a $0.06/lb price increase effective with January contracts. Hey, not so fast, give processors some time to celebrate, recommends the PlasticsExchange.

Market participants returned from an extended holiday break ready to deal, and the polypropylene (PP) market (and the PlasticsExchange trading desk) welcomed the action. Homo- and co-polymer PP prices were pressured heavily just as the year began, and managed steady this past week, as some spot resins were scarce and PGP held its ground. In a relatively rare occurrence, railcar transactions outstripped truckload deals, reflecting not only the lack of available packaged material, but also buyers recognizing value in these heavily discounted prices.

While PP contracts already lopped off a stunning $0.18/lb over the past two months, the December decrease of $0.08/lb was deemed a tad light. Given spot PGP monomer levels since then, it seems that another $0.02 to 0.03/lb should be relieved in January. PlasticsExchange analysts note that they would prefer to have seen the entire dime come out of the market in December, for true bottoming action; nevertheless, after such a swift and sharp correction, there seems relatively little downside risk at this juncture.

Read the full Market Update on the PlasticsExchange website.

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