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Weekly Resin Report: Strong Exports Push Spot Prices Higher

The seemingly insatiable international appetite for North American resin has been driving export prices higher, which, in turn, has been supporting domestic resin pricing and producer increase initiatives.

The spot resin market remained quite busy last week, although trading in some materials and segments dropped from the very rapid rate seen in previous weeks. Polyethylene (PE) prices continued to rise, with some grades actually accelerating their ascent. Domestic railcar offerings for both PE and polypropylene (PP) were more prevalent early in the week. As material sold, few fresh offers came back, adding to the sense of snug supplies as producers push to implement price increases, reports the PlasticsExchange in its Market Update.

Producer export resin was mostly sold out by mid-month, following a pattern established in the past couple of months. Only limited trader-owned material was available for export prior to new next-month offerings. Phenomenal export demand has provided much impetus to this strong resin recovery rally, which began in mid-May. These super strong exports initially assisted by clearing the huge supply overhang that developed with the onslaught of the coronavirus and ensuing processor shutdowns. The ongoing and seemingly insatiable international appetite for North American resin has been driving export prices higher, which, in turn, has been supporting domestic resin pricing and producer increase initiatives. As spot prices tick higher, there is an ever increasing chance that the July $0.05/lb PE increase will be implemented. PP exports also have been very strong and have become a more meaningful outlet than in years past. The PlasticsExchange expects to see PP contracts jump a cost-push $0.06/lb or so, as monomer supply woes persist.

Resurgence of single-use bags

The spot PE market showed continued price strength, but transacted volumes failed to cut the mustard, writes the PlasticsExhange. The resin clearinghouse said that its trading desk was challenged to complete many transactions, as suppliers generally held firm on their asking price while buyers resisted, sometimes opting for just a truckload rather than a railcar. PE prices averaged about $0.015/lb higher this past week with a large $0.005 to 0.03/lb range of change among grades. Domestic buyers have had a hard time digesting rapidly rising resin prices that have recouped quite quickly, seemingly driven more by strong exports rather than domestic demand, which is still in recovery mode. Even as PE price levels rise, there is still plenty of value at these levels and the international market recognizes it, said the PlasticsExchange. Single-use bags have made quite the resurgence, and prices have gone from a discount to a premium compared with other high-density PE grades, including injection, which has lagged in the recovery. A high-molecular-weight film grade at an export auction that settled at a higher price than most predicted supports this view. 

Producers are on the verge of securing their $0.05/lb July PE price increase, which is in addition to the $0.04/lb already implemented in June. And if that is not enough, another $0.05/lb increase has been nominated for August, as well, reports the PlasticsExchange. While some see the August increase as a hammer to urge July buying in support of the current increase, others recognize that if domestic pricing does not keep up with rising export levels, more and more material will be diverted to offshore sales. There is also a real chance that warm gulf waters will contribute to an active hurricane season, and this extra increase could have been nominated just in case. The PlasticsExchange predicts that the market will continue to rise, noting that there are plenty of dynamics to keep it moving. 

Spot PP trading remained strong. While completed volumes did not reach the previous week’s elevated level, they were still above average. Sales were almost evenly split between homo- and co-polymer PP, while Prime was favored over off grade. Some low-end railcars also changed hands, destined for compounding and exports. After two weeks of heavy trading set off by bullish activity in the PGP monomer market and firming supplies in the PP market, it seemed like some buyers, while still active, were taking a bit of a breather to reassess, according to the PlasticsExchange. Other seemingly do-able deals were disabled by dwindling material availability. By the end of the week, well-priced railcars were hard to come by and ready-to-ship truckloads became much more scarce.

While overall spot PP prices were steady, as the market absorbed the higher levels already achieved in previous weeks, there was a very firm undertone leading one to believe that there is still more upside ahead. Producers should ink a cost-push price increase for July in the magnitude of $0.06/lb, and if supply/demand dynamics tighten further, the elusive $0.02 to 0.03/lb margin-enhancing increase might be finally achieved in August or September. The PlasticsExchange remains bullish from this level in the near term with belief of some relief to come when new production, still targeted for later in the third quarter, goes online with Prime output.

Read the full Market Update on the PlasticsExchange website.

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