Weekly Resin Report: Trading Enters Uncharted Territory

Through the years, we have seen hurricanes, petrochemical/plant fires, tariffs, economic crises, sudden plant outages, force majeure declarations, and swings in energy and feedstock costs affect the resin market, writes the PlasticsExchange in its Market Update, but, it adds, it has never seen anything like this. Over the past couple of quarters, several events stacked on top of each other have slammed the industry. For the PlasticsExchange, that has manifested itself with the biggest trading month ever in January, and a pace that is accelerating in February!

At least a half-dozen resin producers have experienced force majeure conditions, creating severe shortages for polyethylene (PE) and polypropylene (PP) resins. Consequently, spot resin trading has been hyper-active — resin processors, many on supply allocation, have flocked to the spot market to procure material. Very high volumes of resin changed hands through the PlasticsExchange trading desk, even while prices spiraled ever higher. 

PE prices jumped $0.03 to 0.05/lb last week, bringing 2021 spot gains to $0.11 to 0.19/lb, depending on the scarcity of the grade. PP prices were up $0.17/lb in January and added a full dime the first week of February. Though the price stings, demand has remained good, and it has been easy to find homes for the slightly improved flow of spot offerings, writes the PlasticsExchange. 

While imports were sought to offset the resin shortfall — and ships full of resin have been reaching US coasts — soaring ocean freight rates from Asia, as much as $0.20/lb, have largely impacted the import arbitrage, reducing incentives and the incoming flow of material to the Americas. Widespread shutdowns and then resurgent post-quarantine consumer demand disrupted supply chains, while currency fluctuations and lopsided world trade displaced shipping containers, contributing to massive spikes in ocean freight, which further shifted regional trade patterns and resin supply/demand dynamics. Even as US resin prices skyrocket, Latin American demand for US resin has been very strong. PE shipments to Mexico are expected to remain elevated until the Braskem Idesa issue is resolved and the plant returns to full operating status. As such, Latin America has been the export hotspot for incremental pounds from the United States, especially as Asian orders slowed ahead of the Chinese New Year. 

Co-polymer PP has been the scarcest of materials and soared $0.16/lb in January, while homo-polymer resins climbed $0.17/lb, catching up a penny to co-polymer PP, which had built an extra $0.04/lb premium during the second half of 2020. The rise in spot prices closely matched the January contract increase. As has been seen during the past five months, PP increases have had both a monomer and successful margin-enhancing component. January PP contracts jumped a hefty $0.12/lb, commensurate with the PGP increase, plus as much as $0.05/lb more for margin, depending on producer. There is an even larger hike already looming for February, as PGP monomer costs continue to escalate seemingly unabated. Spot prices for both homo- and co-polymer PP have crossed the $1/lb level, and the traditional penny moves have transitioned to now jump in nickel increments. 

On the PE front, high-density PE blow molding, which remains super snug, jumped some $0.15/lb in January, while the rest of the PE slate averaged $0.11/lb gains. Ongoing production disruptions and excellent domestic packaging demand coupled with particularly strong exports to Latin America have contributed to very bullish conditions. PE producers leveraged upward market momentum and their strong selling position in January, to implement their $0.05/lb contract increase, bringing the total to $0.29/lb since June. Super short resin supplies could carry yet another increase, and the next $0.07/lb currently in play for February is already leaning toward implementation.

Read the full Market Update on the PlasticsExchange website.