Weekly resin report: Trade tariff skirmish has chilling effect on spot resin trading

Spot resin trading began last week extremely active, but the market chilled a bit mid-week as looming (retaliatory) trade tariffs proposed by China, which include certain polyethylene (PE) resins, sent market participants scurrying to the sidelines, reports the PlasticsExchange (Chicago) in its Market Update.

While the tariffs are not yet in place, and there is likely lobbying and high-level negotiating to be done, if they do become implemented, PlasticsExchange analysts would expect some negative price impact on at least low-density PE (LDPE), which seems to be the primary commodity resin targeted. In the meantime, LDPE for film remains snugly supplied in North America, and, ironically, was the only PE grade that posted a gain this week while all other PE resin prices were pressured. Polypropylene (PP) prices were mostly steady to weaker.

The PE markets were very busy throughout the week, though the bulk of our transactions were completed during the first part. Producers acknowledged that the $0.03/lb increase nominated for March did not hold and another attempt would be made for April. Resin buyers then scattered as news emerged of potential Chinese tariffs on PE, which could impact the market. Market prices became very wide, as bids dropped precipitously awaiting further clarification. The market was bid much of the way back up over the next few days, as spot supplies remain relatively tight, but most grades still ended in negative territory. The PlasticsExchange holds a bearish bias toward PE pricing and has sold off the vast majority of its inventory, and will continue to hold minimal stocks for now as it opts for back-to-back transactions. 

PP trading moved along at a healthy clip, unfazed by the potential tariffs that could impact PE resins. There was a steady stream of off-grade PP railcars that flowed into the spot market, some sold, while some offers accumulated. A seemingly minor force majeure was announced on PP due to production complications. Surplus prime material remained hard to source and was priced at a premium, giving some contract buyers a little sticker shock when seeking extra material to fill in supply gaps. April PP contracts could be interesting—PGP monomer contracts are poised to slide a bit more—but producers are looking to expand margins by $0.03 to 0.05/lb. Perhaps the forces might balance out around steady. 

Read the full Market Update on the PlasticsExchange website.