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Weekly resin update: Out with the old expensive inventory, in with the new lower priced materials

Spot resin trading picked up a bit the week of Feb. 1, reports the PlasticsExchange in its market update. There was a more fluid flow of resin offers, particularly polyethylene (PE), and buyers and sellers were more amenable to market pricing. As time ticks on, resellers' stock of old and expensive inventory is being depleted and replaced with lower priced material. As prices slide, buyers, whose own resin stocks are also depleting, are realizing a significant cost savings and becoming more comfortable placing orders.

Spot resin trading picked up a bit the week of Feb. 1, reports the PlasticsExchange in its market update. There was a more fluid flow of resin offers, particularly polyethylene (PE), and buyers and sellers were more amenable to market pricing. As time ticks on, resellers' stock of old and expensive inventory is being depleted and replaced with lower priced material. As prices slide, buyers, whose own resin stocks are also depleting, are realizing a significant cost savings and becoming more comfortable placing orders. Together, this has helped market participants accept the new pricing reality, thus facilitating spot transactions. 

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Image courtesy Cool Design/freedigitalphotos.net.
PE producers took a tough stance on contract prices in January, only reversing their proposed $0.05/lb increase to a net $0.03/lb decrease late in the game. By contrast, just a week into this month, several producers already dropped their February contracts by $0.03/lb. The February decrease brings total contract price relief to a healthy $0.15/lb since August, even with the entire fourth quarter remaining flat, reports the PlasticsExchange. But what would the PE market be without a price increase on the table? No worries, several producers just nominated a fresh $0.05/lb increase for March contracts.

With contract posturing out of the way early, producers were more liberal with their spot PE offers. Resin availability was plentiful across most grades, although certain materials were somewhat snug, reflected by mixed prices. Some of the deeply discounted offers that were originally market leading have now become more mainstream. On the other hand, when the market was eroding, there was a general feeling to sell poly-anything, and typical premiums between grades were crushed. Now that the market seems to be finding a new level, some grades have seen a small uptick in pricing, such as LDPE and LLDPE for injection or roto molding.

HDPE resins remain the cheapest in the marketplace and all grades continued to drop; the lowest levels are seen for blow molding followed by injection and then film.

The spot polypropylene (PP) market saw renewed interest. Several PP production issues have left some processors short of material, while others are now entering their traditionally stronger demand season. Copolymer is notably absent and gained a half-cent on homopolymer. While interest is there and those in need of resin are paying up, others that can get by are balking at the rising prices and seeking alternative supply such as imports and repro. In January, PP producers implemented about $0.03/lb of their $0.06/lb price increase; the $0.005/lb drop in January PGP contracts seems to have been lost in the shuffle, let's just call it a rounding error, remark PlasticsExchange analysts. The spot PGP market has barely been tested so far in February, but current levels indicate that another $0.01 to 0.02/lb drop in PGP could be warranted this month.

International PP prices are well below North American levels, so exports are mostly limited to lower-end off grade and some prime material for Mexico, only totaling about 1% of U.S. production. An increasing volume of prime imports are hitting the U.S. shores, with substantial shipments still on the seas. If producers continue to squeeze the processor for further margin-enhancing price increases, the import arbitrage will remain open and the U.S. will likely become a net importer of PP in the very near future.

Read the full Market Update on the PlasticsExchange website.

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