Polyethylene (PE) spot prices regained the previous week's $0.005/lb loss and in many cases climbed into new, recent highs. Michael Greenberg, CEO of spot-trading platform, The Plastics Exchange (TPE), reports that even though Asian demand remains sluggish, few spot railcars can be had—evidence that higher feedstock costs during February have encouraged producers to ration resin production. With at least these two major market fundamentals supporting the current price increase initiative, it appears that producers will successfully secure the full $0.08/lb increase they've put forward, which is in addition to the $0.04/lb increase pushed through in January.
Overall spot PE supplies have remained tight for most of the month, with much of the market's limited liquidity coming from Houston traders. Some exporters that target sales to India and China were caught with material when the export market stalled ahead of the Chinese New Year. Spot ethylene monomer is scarce and prices remain elevated due to reduced production that has been exacerbated by planned and unplanned cracker outages. Spot ethylene is up $0.16-$0.17/lb since the start of the year, now trading around $0.54/lb. PE producers feel pressure to pass their higher costs downstream, but some resin processors who are still struggling with diminished customer demand, have pushed back against the $0.08/lb increase. Greenberg notes that PE producers that control their supply chain back to natural gas, and the ethane used for ethylene, are making nice margins with the ethane:ethylene spread quite wide at this point.
Asian traders have yet to return to the market, and although some limited demand has been shown, the high price of North American resin has squelched export opportunities, as traders point to more competitive PE offers coming from the Middle East. Latin American buyers have been in the market but for relatively small quantities.
Polypropylene (PP) spot prices were once again on the rise, gaining $0.005-$0.01/lb, as processors scoured the market seeking offers for generic-prime material priced at a discount to February's contracts. While the widespec market is not flooded with material, there has been some availability, according to Greenberg. Upstream, February polymer-grade propylene (PGP) contracts settled $0.065/lb higher, and producers seem likely to successfully pass through the higher costs downstream. In addition, producers are attempting to pad their margins by an additional $0.02/lb.
The steep rise in PP over the past 14 months has lifted the market back to levels previously seen during the hurricanes, according to Greenberg. "Given the relatively high price of resin," Greenberg says, "processors are cautious to keep resin inventories at minimal levels, both fearing and hoping for a break in the market price." PP suppliers have maintained inventory discipline, with weak domestic demand, a limited export market, and high feedstock costs encouraging them to maintain reduced production levels.
Those limited resin supplies throughout the supply chain have made for a challenging spot market, with purchase orders and supplies hard to come by. When material is found, buyers generally balk at the price. Commodity injection grades are tight but often available, with some grades like random clarified tough to find, while others, such as raffia virtually non-existent. February PP contracts seem likely settle $0.065-$0.085/lb higher next week. "To date the polypropylene market has defied gravity," Greenberg says, "but it is starting to feel heavy."