Weekly resin update: Some buyers have unrealistic price expectations

January polyethylene (PE) contracts have yet to settle, but a $0.03/lb decrease now seems likely. While off-grade polypropylene (PP) is somewhat available, prime material is scarce and producers will have some success enforcing a margin-enhancing price increase, targeting around half of the $0.06/lb nominated for January. International resin markets are generally below North American levels, but are showing signs of firming. Extraordinary deals have been cut to continue the flow of PE to offshore destinations and avoid burdensome inventories from developing at the producer level.

The ethylene market was very active during this past holiday-shortened week. Ethylene began under pressure, trading down to $0.155/lb, a new multi-year low, before recovering late in the week. January ethylene ultimately worked its way back up to nearly $0.185/lb, recording a net weekly gain of almost $0.025/lb, offsetting the prior week's loss.

PE trading required extra finesse to bring buyers and sellers together on price. Sellers have generally accepted reasonable offers, but also declined unreasonably low-ball bids, according to the PlasticsExchange. Processors have reportedly been minimizing their contract purchases as January negotiations continue late into the month. Several producers are still holding on to the dream of implementing a $0.05/lb price increase. However, a couple of producers have offered a $0.03/lb decrease, which should become market wide. In the meantime, spot PE prices slid another $0.01 to 0.02/lb, widening the discount gap to contracts. As such, buyers have been tapping the spot market for deals. Export prices in Houston continue to slide amid a demand lull, as Chinese New Year is now a couple weeks out.

The propylene market was relatively quiet; few spot deals were done with just sporadic trader interest.

Spot PP activity was a tad tenuous and transacted volumes ran about average. With energies and other resin markets eroding, PP processors are justifiably frustrated with the January price increase, which seems to be gravitating towards $0.03/lb more than the change in PGP monomer. PP demand seems to be slowing and there are fears of imported finished goods competing with domestically produced goods. Resin availability is spotty—prime is tough to source; off grade is a little easier and at a decent discount. Some resellers reeling from the PE rout are willing to unload PP just to lighten their overall inventories. There are also plenty of offers for imported PP resin permeating the market, which some processors are giving a shot.

Read the full Market Update on the PlasticsExchange website.