The spot resin markets were very active as May came to a close. It was a stark change from the slow start to the month, when many processors were shut down because of the pandemic, reports the PlasticsExchange in its Market Update.

Domestic prices held steady last week with a firm undertone, and off-grade prices inched a bit closer to Prime levels. Recovering energy and feedstock costs strengthened international resin prices, which were supportive to Houston levels. Strong export demand persisted, particularly for polyethylene (PE), but producers were essentially sold out as of the previous week. They intend to raise asking prices for June sales. There were a few Prime polypropylene (PP) railcars to move since some resellers’ sales fell short of forecasts as the automotive sector still lagged.

While we are all enthusiastically looking forward to a full economic recovery, a bit of caution is warranted, notes the PlasticsExchange: Tensions have flared further with China, now over Hong Kong; Latin America has seen a surge of COVID-19 cases; and social unrest continues to boil over in the United States. And if that’s not enough, June 1 marks the beginning of the hurricane season, and the warm Gulf waters point to an exceptionally active one.

The spot PE market followed a heavy-volume week with another strong performance, despite being shortened by Memorial Day. The PlasticsExchange reports that its trading desk was very busy from the get go and that it ultimately completed an above-average number of deals to wrap up a solid month. Given the slow period at the end of April and first part of May, the rebound in activity was very encouraging and a sign that our economy is recovering nicely, said the PlasticsExchange.

There was amply resin availability last week, and all commodity grades were accessible, though the supply overhang has mostly cleared to strong domestic demand and even stronger export sales. Traders bought resin for their inventory, while many processors tapped the spot market both to procure material and gauge market conditions. Some who sensed the upward price momentum bought extra resin, fearing that this would be their last chance at these stellar prices. Others, still reeling from demand loss, decided to wait not because of price, but rather uncertainty regarding future business, according to the PlasticsExchange. Spot prices held steady across the board this past week with a firming tone, as producers seek a $0.04/lb price increase for June contracts to recoup the $0.04/lb that was relinquished in April. Asking prices are expected to jump next week, but it remains to be seen if buyers will be willing to pay up much at this juncture, said the PlasticsExchange.

Spot PP trading was a tad off pace, with prices holding steady for the fourth week in a row and buyers remaining reluctant to build inventories, opting to purchase only for near-term manufacturing needs. Resin availability was sufficient and there was relatively little price spread between railcars of prime and off-grade resin, though a deep discount was afforded for really rough material. As truckload demand exceeded railcar interest, buyers were willing to pay up nicely for packaged material.

The PP market relies on the domestic market for the vast majority of sales, quite different from PE, which exports some 40% of production. With so many processing facilities temporarily shut, the PP market has struggled during the pandemic and April sales reached their lowest point since February 2018. Though resin production has throttled back, upstream inventories have been building but are still very low on a historic basis. PP prices are closely correlated to monomer costs, and PGP has remained quite stable. The PlasticsExchange is optimistic that PP demand will improve as the economy gets back on track.

Read the full Market Update on the PlasticsExchange website.