Weekly resin report: Spot resin trading soared in March

Spot resin trading hit the highest volume in March for the PlasticsExchange in several years, reports the resin clearinghouse based in Chicago. Commodity resin pricing was mixed. Polypropylene (PP) eased another cent amid growing supplies, while April began with an uptick to edge polyethylene (PE) a net penny higher across all grades, despite a flurry of PE offers that initially weighed on the market, reports the PlasticsExchange in its weekly update. Crude oil fell again and has peeled off a quick $6/bbl. NGLs moved lower—ethane sharply. Propylene was relatively flat, while ethylene jumped, recovering nearly $0.04/lb.

Spot PE railcar offerings were plentiful and sold at discounted prices, as resellers had committed to material that still required late-month disposition. This could be a sign that processor purchasing was weaker than anticipated during March, potentially leaving processors exposed to inadequate resin supplies in April.

The week of March 28 also brought quarter-end, and there was a competing purge of material by producers, which amplified apparent availability. The PlasticsExchange reports seeing a similar onslaught of offers in late February, leaving producers with light spot supplies in March, which contributed to the successful implementation of the $0.05/lb price increase.

A quick recovery in domestic PE prices was a boon to national resellers and Houston traders that had held on to slow-moving inventory through the February trough, and for others that scooped up stellar-priced material, which was readily available. Now that prices for HDPE injection and blowmolding are back into the low to mid $0.50/lb, LLDPE film grades are in the mid to upper $0.50/lb and LDPE clarity is again breaching the $0.60/lb level, a waft of caution permeates the air. While the market is capable of pressing still higher, the risk/reward encourages the sale of inventory with lighter replacement buys and a bias toward back-to-back transactions. 

Spot PP trading was better than average, according to the PlasticsExchange. Growing availability, largely because of the heavy flow of imports, has enhanced market liquidity and facilitated transactions. While packaged material initially led the way, a heavier flow of domestic railcar offers has now followed. Spot prime prices slid a cent and are within shouting distance of the cycle lows. Off-grade prices were even softer and can be procured at an expanding discount to prime.

After five quarters of steadily growing margins, which did not significantly raise resin prices, the supply/demand balance has now tipped back toward negative territory as a result of competitive supply. PGP monomer has been fairly flat and should not have a significant impact on the change in PP contract pricing for April. However, at least one major producer will take a margin hit and decrease PP prices in April by $0.03 to $0.05/lb, depending on grade.

The sharp premium that North American PP prices built over international material encouraged the speculative import of PP from both the Middle East and Asia. Capping PP prices has created a modest level of anxiety among suppliers that own uncommitted imported PP inventory.

It is likely that fresh import orders, for material that would arrive in 30 to 40 days, might be crimped and eventually lead to tight supplies once current stocks are consumed. In the meantime, PP prices are soft.

Read the full Market Update on the PlasticsExchange website.