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Weekly Resin Report: Unprecedented Shortfall Maintains Pricing Pressure

Also in resin news this week: Ascend expands long-chain polyamide production; Dow invests to meet demand for downstream polyurethane.

4 Min Read
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Image: Peshkov/Adobe Stock

Higher prices across the board for commodity-grade polyethylene (PE) and polypropylene (PP) resins greeted the holiday-shortened first week of June. North American supplies remain scarce, as production continues to be hampered by planned and unexpected outages as well as a shortage of the monomers and co-monomers needed to amply produce the full slate of grades, reports the PlasticsExchange in its Market Update. In this context, light offerings were expected as sizable price increases have been nominated for June contracts. With pricing power firmly in the hands of producers, even if there were excess supply, it is doubtful they would flood the market with resin and upend the rally, writes the Chicago-based resin clearinghouse. 

The unprecedented supply shortfall leaves no room for error — every additional hiccup that develops in the supply chain can reverberate loudly to send prices even higher. This supply/demand imbalance could further intensify with the onset of hurricane season and its potential impact on the supply chain, specifically in the US Gulf. Producers in the region have already begun notifying customers of their hurricane preparedness plans and possible shutdown procedures, if needed, notes the PlasticsExchange. 

Importing resin has become an even bigger challenge. While resin can be procured in the Middle East and Asia at favorable prices, shipping space to the United States is mostly sold out for June; some routes now take longer than 60 days and could cost upwards of $0.25/lb. This has reduced much of the arbitrage incentive, according to the PlasticsExchange, thereby limiting the fresh flow of uncommitted resin to US shores. Logistics challenges are seen locally, too, as soaring domestic trucking rates apply further upward pricing pressure on US resin deliveries. 

The PE spot market continued its upward price trend, as overall tightness fueled a $0.01 to $0.02/lb rise in bid/ask levels. Demand continued strong and transactions were generally limited by availability rather than price.

High-density (HD) PE for blow molding remained more difficult to find than HDPE for film, well evidenced by their price difference; HDPE co-polymers for pail and large-part injection have been scarcer than HD crate and are priced as such. Linear-low-density (LLDPE) Butene has been obtainable, while Hexene and Octene were very tough to get and commanded nice premiums. Higher flow LDPE and LLDPE grades for injection were mostly absent from the market. LDPE Frac and 2 melt bare were available just north of a buck, while LD High Clarity resin commanded a growing premium. The successful May $0.05/lb PE increase brought the 12-month contract gain to a whopping $0.57/lb. Producers will try to leverage the ongoing supply/demand imbalance to implement their next $0.07/lb increase for June, according to the PlasticsExchange.

PP prices rose as the week wore on amid ongoing shortages and rapidly rising monomer costs. By June 4, spot levels flirted with all-time highs. Although production has improved, most producers remain under force majeure conditions with contract allocations in place. A few prime railcars were made available to the PlasticsExchange market through dealer forecasts, but the quick run-up in spot PGP made pricing challenging to pin down. Even off-grade material, which has been much more available than Prime, thinned out as June commenced. However, Prime PP was not completely unavailable, as imports from both the Middle East and Asia make their long journeys to US coasts. The co-polymer PP premium to homo-polymer PP held steady at $0.10/lb, where it has been since mid-May, writes the PlasticsExchange. This spread typically is seen at $0.02 to $0.03/lb. 

May PP contracts jumped $0.13/lb, commensurate with an increase in PGP; the $0.05/lb margin enhancer was pushed to $0.08/lb in June. Over the past 12 months, PP contracts have increased in the vicinity of $0.75/lb, with variance among producers and processors. These increases combine both a cost-push PGP monomer component along with a series of successful margin-enhancing hikes. Although it is very early in the month, with monomer on the upswing, PP contracts are pointing to another double-digit increase for June, according to the PlasticsExchange.

Read the full Market Update, including reports on oil and gas activity and the monomer markets, on the PlasticsExchange website.

In other resin news

Ascend Performance Materials has expanded production capacity for HiDura long-chain polyamides in its Greenwood, SC, plant. Launched in November 2020, Ascend’s HiDura PA610 and 612 products are used in a variety of consumer goods, industrial, renewable energy, and automotive and electric vehicle applications.

“Exceptional ductility, UV weatherability, and hydrolysis resistance give HiDura resins and engineered plastics reliable, long-term performance in some of the harshest conditions,” said Kaan Gunes, Business Manager for HiDura at Ascend.

Dow reports that it plans to build an integrated MDI distillation and prepolymers facility at its manufacturing site in Freeport, TX. This investment supports increasing demand for downstream polyurethane systems products and advances Dow’s leading positions in attractive applications in construction, consumer, and industrial markets that are growing above GDP, said the company.

The new Freeport MDI facility will replace Dow’s current North America capacity in La Porte, TX, and will also be capable of supplying an additional 30% of product to its customers. In coordination with the start-up of the new MDI facility, expected in 2023, Dow will shut down its polyurethane assets at the La Porte site.

Dow added that its extensive polyurethane systems franchise upgrades key polyurethane components in order to produce rigid, semi-rigid, and flexible foams, and coatings, adhesives, sealants, elastomers, and composites for a range of applications.

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