Weekly resin report: Will new petrochemical plants and reactors coming online bring price relief?

Spot resin trading was substantially better the week of Oct. 16, as activity picked up markedly from the previous week, according to the PlasticsExchange (Chicago) in its Market Update.

Polyethylene (PE) supplies continued to improve and prices were mostly steady to a little lower, though some grades are still snugly supplied.

Polypropylene (PP) availability has become hit or miss and prices firmed up a cent under tight supply/demand dynamics. PE producers by now should have implemented their $0.07/lb of recent price increases; the additional $0.04/lb that has been nominated seems unlikely. PP contracts have gained $0.105/lb since August and should move slightly higher this month. 

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The spot PE market was very fluid. While the volume per transaction has dropped, the number of daily deals has grown and spread across the entire slate of commodity grades. This is more indicative of a normal spot market than the post-hurricane environment, which saw processors urgently chasing material to keep plants running. As such, spot PE prices have begun to ease and, candidly, appear a bit frothy hanging so long at this elevated level, writes the PlasticsExchange. While plenty of material is still selling at current pricing, anxiety is building as the new petrochemical plants and reactors come online and bring the much anticipated tsunami of resin. The massive September production disruption will temper the effect of the additional supply, but it will weigh on the market and off grade first. 

The $0.07/lb PE price increases should be well-secured at this point, and it is entirely plausible that certain producers, especially those predominately in HDPE resins, will firmly seek further price advancement. As the aforementioned new production begins to hit the market, we expect a sharp deviance to develop between higher domestic prices and the market clearing level needed to move large incremental volumes offshore. This will eventually challenge domestic pricing, but we have also seen PE producers masterfully manage to hang on to higher levels a bit longer than one might reasonably expect, writes the PlasticsExchange. 

The spot PP market shook off the slack demand and softer pricing seen in the previous week. The market had temporarily eased a tad, as monomer costs pulled back and overall commodity resin prices came under pressure, but suppliers with limited material have stood firm, not willing to discount their PP inventories amid few competitive offers. PP prices gained $0.01/lb on average with particular tightness developing for prime resins, leaving some demand unfilled. Rougher off grade has indeed been a tad sloppy, as much of it is still targeted toward the higher priced domestic market rather than simply sent into the traditional export abyss. Although early month increases in PGP monomer costs have subsided, producers will continue to pursue their margin-enhancing increase, looking to secure a few cents to October contracts.

Read the full Market Update on the PlasticsExchange website.

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