Weekly resin update: Polypropylene price increase on deck for January

After a tremendously busy first half of the month, the spot resin market eased into a slower holiday mode. Earlier in December, the PlasticsExchange (Chicago) reported seeing a heavy flow of well-priced material, with deep discounts on off grade material. While some domestic processors just picked away to fill in supply gaps, others took advantage of the year-end bargains and bought heavily for re-stocking. The Houston market also saw a high volume of material, some at jaw-dropping prices destined for export. However, it seems that most of December's business was booked fairly early, as the last couple of weeks were relatively quiet. Spot resin availability thinned out and buyers were equally absent as a number of processors shut down for the holiday.

Spot ethylene prices rallied a bit as 2015 drew to a close, reports the PlasticsExchange. Aside from an occasional hiccup, all Gulf crackers have been up and running near full capacity. Ethylene for December delivery was lightly traded, but pushed about a penny higher and went off the board just above $0.19/lb. January, which had been trading at a premium, became the front month and most recently changed hands at $0.20/lb. Ethylene prices are currently set to peak in April at $0.23/lb, before retreating back towards $0.205/lb by the end of 2016.

The polyethylene (PE) market quietly capped an otherwise eventful month and year—2015 saw contract prices decrease $0.13/lb, while spot dropped $0.15 to 0.19/lb, depending on the grade. Aside from a surge of late-month export offers, producers seemed to have purged most of their burdensome inventories during the first half of December. This left market liquidity up to distributors and resellers seeking to sell off their uncommitted stocks before the end of the year. Although most spot PE grades slid $0.02 to 0.03/lb during December, producers managed to hold contracts steady, as expected. While, technically, there will be a fourth attempt to implement the outstanding $0.05/lb price increase, given cheaper energy and feedstock costs and lower international resin prices (providing competition to U.S. exports), domestic processors will be eyeing some price relief early in the New Year.

There was very little propylene activity in this past holiday shortened week. The market, however, was slightly pressured and ultimately marked down fractionally from the $0.30/lb level reached in the previous week.

The often volatile polypropylene (PP) market sailed quietly into year-end; 2015 was best characterized as a period of tight supply driven by production constraints and growing demand. These market dynamics provided PP producers with tremendous pricing power, which they used to expand their margins and profitability.

However, all was not lost for processors as PP contracts declined a net $0.135/lb during the year, with some variance among participants. Resin supplies have generally improved and the expansion momentum slowed in December, growing only a half-cent over monomer. Producers will look to kick-start 2016, with a $0.06/lb price increase on the table for January.

Read the full Market Update on the PlasticsExchange website.