Thanksgiving week was marked by mixed spot resin trading activity, with better-than-expected polyethylene (PE) demand more notable than the continued lack of polypropylene (PP), reports the PlasticsExchange in its Market Update. Export buyers raised their bids, which helped to clean up the lower side of the Houston pricing spectrum, but not enough to move the needle on benchmark prices, which held steady across the board. Completed volumes in November at the PlasticsExchange trading desk tallied among the lowest of 2020.
Overall Prime resin availability remained low throughout the month. While PP buyers generally paid up to get materials in need, PE buyers were more reticent. They have been holding out for a significant price break that has yet to develop. PE contracts rolled flat in November, and producers will give their outstanding nickel hike a third shot in December. PP contracts will rise at least $0.02/lb along with PGP monomer, but will likely see another $0.03 to 0.04/lb stick, as producers have been rightfully pushing for margin expansion, writes the PlasticsExchange. Robust demand from Asia, which seems to be accelerating, could help keep the supply/demand dynamic very tight, as upstream inventories try to recover from storm-related production disruptions. This could make the difference between Santa and Scrooge when it comes to traditional December holiday deals, according to the PlasticsExchange.
The spot PE market was surprisingly busy for a Thanksgiving holiday week. The PlasticsExchange trading desk worked transactions from many different types of buyers, and generated completed volumes that reached the higher side of average. Demand was distributed across the full slate of PE commodity resins. Hard-to-find resins, such as linear-low-density PE Injection, made an appearance, albeit in limited quantities. They were quickly scooped up. Also notable was a surge in demand from buyers shipping to Asia, who were very aggressive in procuring low-density PE film grades. Spot prices held firm and settled flat across the board, offering zero discounts for Black Friday.
Many processors have been banking on major price relief in order to refill their coffers. While some small discounts emerged, it was not enough to excite restock demand. Producers did roll their $0.05/lb November contract increase efforts to December, but after enduring $0.19/lb of increases since June, that is hardly a big win for buyers, writes the PlasticsExchange. Deeply discounted deals are traditionally found in December, and some good buying opportunities are expected this month. If export demand continues to heat up, however, there might be relatively few special holiday deals. If you need material and good offers show up in the first half of December, the PlasticsExchange suggests buying them rather than waiting for a chimeric extraordinary deal later in the month.
PP sourcing remained difficult, as supplies remain categorically tight, and prices ended flat with a firm undertone. Off-grade railcars continued to come and go, but there were few Prime cars to be found. Good pockets of Prime packaged homo-polymer PP and some co-polymer PP were found in Houston. Some of the material sold, and then asking prices for remaining lots were raised a couple cents, anticipating higher replacement costs come December. Low and mid-melt materials generated the majority of completed volumes for the PlasticsExchange; high-flow resins saw better demand than supply and commanded strong premiums when offered. November PP contracts have not fully settled, but will begin with a two-cent cost-push bump and should ultimately realize even more. We felt at least $0.03/lb of a margin increase was already earned in October, said the PlasticsExchange, as spot prices had soared, but it was not awarded then. Producers have nominated an additional $0.04/lb for good measure for December.
PP imports continued to flow in during the month, but fresh December offers have been minimal. South American buyers have been seeking US PP material, as more Asian resin remained close to home. There seems to be more upside to PP prices ahead, but the PlasticsExchange advises exercising caution, as levels for some materials such as PP Random Clarified have reached dizzying heights.
Read the full Market Update on the PlasticsExchange website.