Weekly resin report: Trading desk reports one of the busiest weeks of the year

How busy was it? Enough to make last week one of the best of the year in terms of completed volumes, according to the PlasticsExchange (Chicago). Activity was heavily skewed toward polyethylene (PE) over polypropylene (PP), adds the resin clearinghouse in its Market Update.

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Spot PE prices were mildly mixed, with some commodity grades making small half-cent movements. The jury is still out on the $0.02 to 0.04/lb price increase that is on the table for October PE contracts; for added upward pressure, at least a couple of producers have nominated another $0.03/lb increase for November.

PP contracts are rolling flat in October, reports the PlasticsExchange. While monomer costs have continued to ease, pointing to a cost-driven decrease in November, an offsetting $0.02/lb margin increase has been floated by at least one producer. PP exports are just sputtering along with only about 1.5% of total sales going offshore. On the other hand, PE requires hefty exports to offset the new/incremental resin production. As such, and despite Chinese tariffs, PE exports have surged, accounting for an average of 30% of total sales, compared with the trailing 12-month average of less than 22%. 

The spot PE market has been very liquid, and the vast majority of realistic trading opportunities that crossed the PlasticsExchange desk were successfully completed this past week. Transaction volumes continue to grow and are nearing the robust levels seen a year ago in the aftermath of Hurricane Harvey. While PE contract prices remain firmly supported with $0.03/lb increases on average nominated for October and November, a steady flow of well-discounted spot material has compelled market participants to engage that market for relative deals. As PE exports continue to ramp up to consume a significant portion of the added PE production, another wrench has been thrown, compounding complications caused by the tariffs. Rail carriers have begun to restrict the heavy flow of railcars that cross the border into Mexico, which will put even more pressure on the already bursting Houston-area packaging houses. The overall PE export market has been very healthy and this is just one more confirmation.

By contrast, PP trading has been challenged by a mismatch between timely product demand and actual shippable supply. The particular grades in need have not necessarily been easily accessed, as overall PP availability has been fairly tight. PGP monomer costs continue to ease, which points to softer resin prices ahead, so resellers have shied away from adding significant volumes of PP to their uncommitted inventories. At the same time, railcar offers for surplus prime PP resin have been scarce and priced to reflect an opportunistic premium, which has been unappealing to processors. This type of situation can generate special discounted deals toward the end of a month, usually available for a very short time and to those who are ready to pull the trigger with orders.

Read the full Market Update on the PlasticsExchange website.

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