Resin Price Report: End-of-Year Discounts Begin to Appear

Thanksgiving week was short but sweet at the PlasticsExchange trading desk. The spot resin market had a solid showing: Supplies continued to improve as a relatively heavy flow of polyethylene (PE) and polypropylene (PP) off-grade railcars materialized. Prime packaged resin remained scarce, however.

The resin clearinghouse reported that a limited number of buyer inquiries hit its spot marketplace the week of Nov. 20, but that most realistic offers met with success. Some deals were for normal monthly customer orders; others were for urgent truckload deliveries required for processing over the long holiday weekend. For last-minute orders, availability and quick service trumped price; buyers with more patience have been seeking super sharp prices to entice their purchase orders. Some sellers acquiesced and chased the low-ball bids to reduce inventories as the year comes to a close. PE producers have been lowering their export prices to stay competitive on the global market, as well, which has added to the bearish sentiment.

PE trading picks up

PE trading was a bit brighter than expected, as some processors sought ready-to-ship supplies ahead of the holiday. Prime PE prices at the PlasticsExchange trading desk held steady, although some nicely discounted railcars became available. The two recent force majeures have been lifted by Nova and CPChem; however, the market has not been flooded with material as producers, in general, appear to be cautious with reactor rates to prevent burdensome inventories from developing.

PE contracts roll flat, at best

Despite the average $0.03/lb price increase nominated for November, the market has lost its upward momentum and larger buyers have been clamoring for a decrease. PlasticsExchange analysts believe that PE contracts will roll flat, at best, and said they would not be surprised to actually see $0.03/lb peel off. Domestic demand has been rather poor in November, as resellers and processors have generally been reducing their resin positions, which is typical for the fourth quarter. Direct exports will remain robust through the end of the year, according to the PlasticsExchange, as North American producers enjoy a cost advantage compared to most of their international counterparts. Nevertheless, incremental export sales have slowed as buyers try to drive prices lower.

PP resin prices lose another cent

The PP market fared fairly well during the holiday-shortened week, reports the PlasticsExchange, as buyers picked away at offers that came with reduced pricing. Overall PP levels dipped another penny, led lower by easing feedstock costs.

Demand for PP copolymers has been solid — supply remains relatively scarce— while homopolymers, especially off-grade resins, have been plentiful.

PP processors had been limiting their volume purchases as they attempt to avoid peak pricing. Unless another round of polymer-grade propylene (PGP) disruptions come into play, this leg of the cycle, indeed, seems to have topped out in November. It also appears that PP producers have reacted quickly to the lackluster demand this month and cut operating rates further, which placed unneeded PGP back into the spot market, helping to cap the monomer rally.

Nonetheless, November PP contracts remain in position for a mild increase because of the cost spike earlier in the month. Any further upstream production issues could easily sway this market again, since PP inventories throughout the supply chain are still considered tight, notes the PlasticsExchange.

Read the full Market Update, including news about PGP pricing and energy futures, on the PlasticsExchange website.