Weekly Resin Report: Trading Activity Picks Up, as Manufacturers Begin to Reopen

Spot plastics trading continued to improve last week, as an increasing number of temporarily shuttered manufacturing facilities returned to operation, requiring resin to run. Trade flow from both buyers and sellers was fluid and transacted volumes rivaled the average tally seen during the strong first quarter of 2020, reports the PlasticsExchange in its Market Update.

Cool Design
Image courtesy Cool Design/

Recovering energy and feedstock costs have added some fuel to the fire, aiding market sentiment which has been shifting from fiercely negative to somewhat positive. Producers have been doing their part to maintain a supply/demand balance by reducing resin production to keep an overly burdensome inventory overhang from developing. They also reacted quickly to ratchet down pricing, as needed, to maintain historically high exports. Now that the market has started to return to a more normal state, Houston polyethylene (PE) prices have lifted a couple cents and the domestic $0.04/lb April decrease could be the total contract relief to trickle downstream. Although May is still in play, a number of producers have already nominated a $0.04/lb increase for June. Polypropylene (PP) contracts had shed a deuce in April, while firmer monomer prices have dashed hopes for an additional decline in May.

The spot PE market continued to gather steam and approached pre-pandemic activity levels as more states began to reopen from stay-at-home orders. The PlasticsExchange reports that its trading desk was once again busy working the growing number of sourcing requests that came to its platform, and transaction levels reached the realm of its 2019 averages. Spot pricing had a firm undertone and the low end of the spectrum cleaned up, though it was not enough to move the needle — prices held flat across the board. Although truckload orders still dominated over railcar sales, the feeling of normalcy seemed to return and the deal flow felt natural, writes the PlasticsExchange. Some customers bought more than their normal volumes, taking advantage of especially low prices.

On the supply side, the market quickly shifted from very loose to fairly tight after huge quantities of resin moved directly into the export abyss. So many export orders were booked that container space to Asia is already very limited until July. These huge export sales — nearly two billion pounds in April, representing about 42% of total PE sales — soaked up spot supplies. Several producers claim to be sold out of many grades. After five months of upstream resin inventory builds, producers collectively pulled down around 270 million lb in April. Given these comeback conditions, and the fresh $0.04/lb increase nominated for June, it would be surprising to see another decrease come out of the contract market in May.

Spot PP trading was good, but not great, writes the PlasticsExchange. Demand lagged a tad and there was sufficient supply to meet incoming resin requests. Sectors of the PP market are still slow, but automotive manufacturing facilities are poised to reopen, which should spark fresh demand. The reseller community still has some inventory to shed and few are excited to procure more material to just add to their PP stocks, which has likely contributed to the overall slack buying. While firming monomer costs point to a likely rollover for May PP contracts, spot prices for both homo- and co-polymer PP remain slightly discounted, presenting good opportunities. As more manufacturing resumes, the PlasticsExchange believes the market will work through the supply overhang, which is not too large. These markets can change very quickly, and there are still some sharp deals out there.

Read the full Market Update on the PlasticsExchange website.

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