The beginning of December marked the slowest resin trading week of the year, reports the PlasticsExchange (Chicago) in its Market Update. Activity picked up mid-week, but only slightly, with ho-hum daily volumes amid limited spot demand.
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Processors are de-stocking, which is both seasonal as the year-end approaches but also a result of lofty resin prices that are now coming un-done. Offers for both polyethylene (PE) and polypropylene (PP) flowed freely and domestic railcars were well discounted, as burdensome upstream resin supplies weighed on the market. PE prices shed another cent, while PP chunked off $0.02 to 0.03/lb. Contract prices for both PE and PP decreased in November and seem to be headed for similar declines in December.
The spot PE market began December cautiously and quietly, failing to maintain the heightened pace seen at the end of November, which had become the norm for much of 2018. Transacted volumes and overall demand were off, with most trading chatter coming from suppliers looking to unload warehoused materials while passing along producer railcar offers, hoping to find a buyer before retreating upstream without a sale. Processors picked away with small purchase orders, buying only what they needed to fill in supply gaps, as they watched spot PE prices slip another penny. At least one producer, in an apparent effort to help stem the slide, nominated a price increase for both December and January, seeking $0.03/lb and $0.05/lb, respectively. At this time, spot activity does not support these ambitions, writes the PlasticsExchange.
Many are calling for further price decreases to close the gap between ever-falling spot levels and the resilient contract market, save for the $0.03/lb decrease conceded in November. While record export activity was reported in October, largely because of producer direct sales efforts, incremental export sales remained challenged by both soft prices and overseas demand. It would not be surprising to see PE production throttled back in December, as producers seek to regain pricing power in the new year, notes the PlasticsExchange.
This past week was fairly active for PP, despite the fact that few deals were actually completed. The PlasticsExchange trading desk fielded a healthy number of inquiries for immediate shipment, and while some orders were filled, in many cases, price expectations did not match up. Of those transactions that were completed, volume favored co-polymer PP, where prices had eroded $0.04/lb this past week alone. Homo-polymer PP slid a penny less. Many trading partners had scarcely any PP warehoused ready to go and did not want to meet the low-ball buyer bids, according to the PlasticsExchange. While there were plenty of fresh railcars offered for new shipment at workable levels, the timing on these delays created challenges, which is typical in a rapidly falling market.
November PP contracts decreased $0.10/lb, commensurate with a drop in PGP monomer; several resin producers are seeking to reduce December PP contracts, but to a lesser degree than the forthcoming drop in December monomer contracts. With import arbitration closed, the PlasticsExchange foresees a tightening of the supply/demand dynamic developing, perhaps early in the new year. For now, though, there are relative deals to be had for railcar quantities.
Read the full Market Update on the PlasticsExchange website.