Despite challenging polyethylene (PE) conditions last week, high volumes in polypropylene (PP) generated one of the best overall weeks ever at the PlasticsExchange trading desk. The industry is reeling in the aftermath of Hurricane Laura, reports the PlasticsExchange in its Market Update: Some resin production remains offline, largely as a result of significant damage to the Louisiana power grid, and supply chains are still interrupted. As expected, the flow of fresh railcar offers was sporadic, and most material was off grade. Prime truckloads of all commodity grades were available, but in limited quantities. Prices for both PE and PP resins were already on the rise before the storm and then jumped in chunks over the past several weeks. They are now transacting at lofty levels.
PE contracts are poised to record their fourth straight monthly increase. If this nickel is fully implemented, contracts will be up $0.19/lb since June. PP contracts will see little change based on monomer costs this month, but producers should easily receive their previously elusive margin-enhancing $0.03 to 0.04/lb increase, according to the PlasticsExchange. There are similar increases starting to be nominated for both resins for October. Incremental exports for both resin groups have essentially ground to a halt since the hurricane, since the supplies are needed here in the United States. On top of all this, more storms are forming in the Atlantic again with at least one already targeting the Gulf Coast!
The spot PE market, surprisingly, struggled this past week: Resin availability was thin, buyers resisted further price advancement, and, consequently, completed volumes at the Chicago-based resin clearinghouse were “good, but not great.” Louisiana power outages persisted and considerable resin production disruptions remained, as did force majeure supply conditions, leaving very few fresh railcars for the spot market. Resellers provided adequate liquidity across all Prime commodity grades, but with little replacement material to be had, they often placed more value on their resin than buyers were willing to pay.
All high-density PE grades added another cent this past week, as did very scarce linear-low-density high-flow PE, but other commodities like low-density and linear-low-density PE for film, while also tightly supplied, seemed to stall in their ascent. The PlasticsExchange feels that the spot PE market has been rightfully consolidating at this elevated level. Export requests continued to come in, but soaring US prices have shut off incremental sales opportunities, shifting more well-needed material toward domestic buyers. Overly tight supply/demand fundamentals are likely to carry the September $0.05/lb price increase; if so, the four-month tally will reach $0.19/lb. The PlasticsExchange reports seeing another nickel nominated for October, but not all producers have followed suit . . . yet.
Strong PP trading generated the largest volume week of 2020 at the PlasticsExchange trading desk. Heavy processor demand came up against snug upstream resin supplies, exacerbated by storm-related force majeure conditions, limiting even contracted resin deliveries, which sent buyers scrambling to find material to process. Resin availability actually improved a tad during the week, as the trading desk focused fragmented supply into an easily accessible marketplace. Material did not last long, however, and while price is always extremely important, at times this week it seemed secondary to quick delivery. Needless to say, there is a limit to what the market will bear.
Co- and homo-polymer PP both traded heavily: Prime slightly outsold off grade, and low-, mid-, and high-melt grades were all well represented. Good quality railcars sold in a heartbeat, with Random Clarified and CoPP No Break resins commanding a large premium. While the PlasticsExchange did not move its benchmark pricing this week, overall price levels consolidated on the high side of recent ranges, with additional upside likely. Braskem’s new PP plant began production last week, though it could take some time before Prime materials are consistently made. International PP pricing pales in comparison with domestic levels, leading the PlasticsExchange to anticipate more imports than exports over the next couple of months. Incremental material already is on the water heading to the coasts.
Read the full Market Update on the PlasticsExchange website.