The spot resin markets coasted into the end of the month and quarter, both of which were ones for the record books, reports the PlasticsExchange in its Market Update. Demand continued to outstrip supply, as has been the case for the past five to six weeks. After rallying all month long, resin prices stayed flat last week, consolidating at lofty levels. Resin trading did not skip a beat as the calendar flipped to October and processors scurried to fill in supply shortfalls.
To recap: Already tight supply/demand dynamics were exacerbated by Hurricane Laura, which disrupted Louisiana resin production more than a month ago. That helped producers secure a series of price increases for both polyethylene (PE) and polypropylene (PP) contracts. Spot PE prices have run up as much as $0.19/lb since bottoming out during the pandemic in May. Contracts garnered the same increase over the past four months, with another nickel on the table for October. Spot PP prices rose $0.20 to 0.22/lb during this period, outstripping the total contract increases of $0.125/lb. Producers are seeking to catch up with another margin-enhancing increase for October, reports the PlasticsExchange. Though new and downed production is starting to come back online, this is no time for complacency, as more storms are forming on the horizon.
Spot PE trading had a solid week — deals were done across the whole range of commodity resins and prices held flat. Demand was good, with processors generally opting for single truckloads. A whisper of uncertainty crept into the market, however, as the month came to a close, writes the PlasticsExchange.
October began with some fresh railcar offers from resellers’ forecasted supplies. Having begrudgingly accepted $0.19/lb increases over four months, buyers were wholly uninterested in hearing prices another $0.05/lb higher, reflecting the current price increase. This market has been on a nonstop rally and started to feel a bit tired, according to the PlasticsExchange. However, this pause does not necessarily signal an end to the bull run, added the Chicago-based resin clearinghouse, as some production disruptions persist and supply remains quite tight.
The fourth quarter often brings softer demand and could provide the market with an opportunity to re-balance, especially when downed plants return fully online and new reactors begin production. But we are still in the midst of the hurricane season and the possibility of a late storm should be taken into consideration. Consequently, ample resin stocks should be kept on hand. Export interest continued to steadily flow in and several spot deals were booked this past week at well-discounted levels compared with domestic prices. There is stronger export demand hanging a few cents under the market, which producers could tap, if needed.
Spot PP trading remained busy — demand was strong, supply was scarce, and benchmark prices held steady. The week’s completed transactions fell short of the PlasticsExchange’s recent averages, largely because of lack of availability along with some price pushback. A range of prices appeared in the marketplace, and some softness was seen in low-end material as startup cars became available. Good off-grade prices were strong and Prime resin consolidated at the high end of the spectrum.
Processors have scaled back their purchasing, as soaring prices became prohibitive and thoughts turned to better supplies ahead. Braskem’s new world-class PP plant has begun production and LyondellBasell’s Lake Charles, LA, plant also has restarted, and while still under force majeure, processors reported higher allocations for October than initially expected. The railroads servicing that facility are now fully functional and the New Orleans rail gateway has resumed normal service. Large quantities of imported PP have begun hitting the coasts, but most of it has been pre-sold.
Given the lofty price level and anticipated easing of supply conditions, resellers have shifted away from buying every well-priced railcar or truckload and have generally opted to transact new opportunities on a back-to-back basis. Even with the change of sentiment, practically every Prime and good off-grade pellet has been scooped up quickly to fill current needs. The outlook from the PlasticsExchange has been trending from bullish back toward neutral given that there is some froth in spot pricing. It’s worth remembering, however, that industry inventories are at historically low levels and need to be rebuilt from a deep trough.
Read the full Market Update on the PlasticsExchange website.