The folks at the PlasticsExchange were not quite ready to strike up the band and belt out, “Happy days are here again,” but they did say that spot resin trading felt a bit more like the “good ole days, which actually weren’t too long ago, just seems so.” A steady stream of buyer requests and sellers’ offers gave a nice rhythm to the market, reports the resin clearinghouse in its Market Update.
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Spot prices were firm to mostly higher and heavy volumes changed hands, both domestic and export. Overall market sentiment continued to improve as many of the supply, demand, and pricing fears that gripped the market during the onslaught of the pandemic have been fading away. Strong export demand soaked up much of the material that hung over the market, energy and feedstock costs recovered more, and a sense of optimism began to permeate as processors re-opened temporarily shuttered facilities and saw fresh opportunity in reshoring manufacturing to the USA, writes the PlasticsExchange.
Processors received contract price decreases in April, as polyethylene (PE) contracts declined $0.04/lb, while polypropylene (PP) contracts dropped $0.02/lb. While there were early hopes for additional relief in May, the spot market has since firmed and contracts should now settle steady. The PlasticsExchange said that it added to its market-making inventory during May, given that prices were compelling with limited downside risk. It now seems that a corner has been turned and there could be some upside ahead.
PE trading was very active last week, said the PlasticsExchange, which made for a liquid market across its slate of Prime commodity grades. Completed volumes ran well ahead of year-ago levels and returned to the rapid pace seen in Q1 2020. There was steady order flow from both buyers and sellers, and deals came together fluidly while prices inched higher, generating $0.005/lb gains for most resins. Processors bought material for near-term needs as well as to restock at still-favorable prices, dealers came to procure truckloads to supplement their late railcars, and export traders continued to buy with both hands. Available supply at the sharpest of prices has dried up, as producers work to raise Houston prices by a couple of cents. The lower end of the domestic pricing spectrum also firmed, as off-grade material available weeks ago at jaw-dropping prices has sold and new offers have come in a few cents higher. Buyers, both domestic and export, seemed to recognize that the market has bottomed and were OK paying up a penny or so for incremental material. After ceding a $0.04/lb decrease to buyers for April contracts, May PE contracts should now finish flat with a fresh $0.04/lb increase on the table for June.
After three slow weeks of uninspired activity, spot PP trading returned to a more typical pace, as more shuttered manufacturing came back online and prices showed resilience. The flow of resin offers was a little lighter, though most grades could still be sourced. Spot PP prices stopped sliding early in the month after monomer prices firmed, dashing hopes for another contract decrease for May. The PlasticsExchange noted that it did not see a massive inventory purge or blow-out prices, which can signal a bottom like in PE, but, rather, slowly firming conditions and more optimism from downstream buyers.
As spot PP demand improved, sellers were less willing to chase buyer bids and the coveted PO, and processors, in turn, were a bit easier on the negotiation, which helped transactions come together. While deals increased, processors still opted for truckloads over railcars. Completed PP volumes were very good, but fell short of the heightened levels seen during the first quarter, when the export market was roaring. It remains to be seen how participants react as additional processors re-open their facilities, but at the moment, the PlasticsExchange said that it has a slightly bullish view on PP pricing.
Read the full Market Update on the PlasticsExchange website.