Weekly Resin Report: Trading Gains Momentum as Prices Stabilize

The pace in spot resin trading kicked up a notch the week of Aug. 30, while prices for both polyethylene (PE) and polypropylene (PP) remained steady, reports the PlasticsExchange in its Market Update. The flow of activity from both buyers and sellers increased, bringing about the resin clearinghouse’s best performance in nearly two months. While there were some lively discussions concerning Hurricane Ida, the surge in transactions had more to do with typical early month orders and the traditional seasonal uptick in demand at the beginning of September.

Overall resin availability continued to improve. A steady stream of off-grade PP railcars rolled in and, as has been the case for the better part of two quarters, prime PP was mostly made available through imports. PE availability also was better, with all commodity grades seen coming and going but not necessarily in high volumes.

Most PE/PP resin facilities spared by the storm

Ida, the first hurricane to hit the US Gulf Coast this season, packed a big punch and hit Louisiana hard, shutting down three PE plants and one PP plant. The majority of offshore gas/oil platforms went offline, and inland flooding has disrupted freight routes. Still, Ida avoided most of the PE/PP resin production facilities in the Texas and Louisiana gulf area. While there was some disruption, this was not an incredibly devastating weather event like Winter Storm Uri or Hurricane Laura. 

There is still damage, nonetheless, with no certain timeframe for a return to complete normal operations, notes the PlasticsExchange. Monomer and resin companies that were affected said restoration and startups will largely depend on utilities and access to feedstock. Hurricane season is far from over and producers have been preparing for these next two months by building resin inventories and outlining emergency storm procedures.

PE spot prices hold steady

Ida’s impact on production did not spur much additional PE buying, though volumes were solid and domestic spot prices held steady. Spot PE prices gradually slid a few cents lower in August while contracts, which were flat in August, remain at record highs. Producers will seek their nickel increase again this month. Resin availability was much improved, but high-density (HD) PE for injection and blow mold was generally still in short supply and commanded the largest premiums. One producer ended its linear-low-density (LLD) PE force majeure at its Texas facility but is keeping a sales control program in place as well as its force majeure on low-density (LD) PE. At least four other producers are still on PE force majeure  or sales allocation/control programs. Most resellers have worked down their inventories, while suppliers that had been building resin stockpiles in preparation for the hurricane season now have the opportunity to sell off material and maintain pricing with some PE production offline.

Two major resin suppliers shut production at their Louisiana plants ahead of Hurricane Ida and were already working toward bringing those units back online. Other producers may find themselves in a position where they might need to start cutting prices to re-establish high-volume exports and keep burdensome inventories from growing further, according to the PlasticsExchange.

Easing of PP resin prices ahead

Spot PP prices were stable, as market participants assessed Ida’s impact on production and supplies. One resin producer shut production at its Louisiana PP unit ahead of Ida but was working toward a restart. Another PP supplier declared force majeure at its Louisiana facility after Ida passed, and did not provide a timetable for restart. A handful of large-volume deals transacted as buyers secured their short and mid-term needs. Sellers were measured with their offerings, thinking the market could be near the top, while overall supplies were also still considered tight. Although PP prices were largely unmoved, other factors were considered, including heightened PGP prices, which have started to waver; planned turnarounds in September and October; strong producer margins that could be susceptible to erosion; and a lack of recent imports, which could temper a decline. PP prices are still likely to ease once PDH units stabilize and polymer-grade propylene (PGP) availability improves, according to the PlasticsExchange. Meanwhile, one supplier formally announced a nickel margin-enhancing increase for September contracts, on top of the September PGP settlement. This follows August PP contracts, which rose $0.11/lb in lockstep with the same PGP contract increase.

Read the full Market Update, including updates on PGP pricing and energy futures, on the PlasticsExchange website.