Resin Price Report: Soft Start to New Year

Spot resin trading was a bit slow to get going the first week of the new year, reports the PlasticsExchange in its Market Update. While many market participants were still out for the holiday, there were deals to be done as some processors needed resin to run. Traders’ inventories were relatively thin and average prices at the PlasticsExchange trading desk rose a bit more than a cent on the week, with some variance by grade.

A meaningful flow of spot railcar offers has not yet materialized, although some cars of prime polyethylene (PE) for January shipment were made available from reseller's forecasted commitments, reflecting the nickel increase on the table for this month, but open to bids. January polypropylene (PP) railcars came to market on a PGP-plus basis, and the premium over monomer had expanded over the compressed levels from December, noted the PlasticsExchange in its weekly report.

It’s customary to see spot-market strength in January, and some cost-push support is already developing. It will be interesting to see if the upward momentum will continue or if the heavy buying in December will sap January demand, muses the PlasticsExchange.

Spot PE market dynamics

The spot PE market started to rev back up as participants began to return from the New Year holiday. Prices continued to firm from the mid-December lows, with prices, on average, bumping up another cent or so. Completed transactions were spread across the main commodity grades, but overall volumes were just a sliver of last month’s heavy turnover.

Producer railcar offers have been minimal the past couple of weeks after a very heavy liquidation of material that seems to have cleared out the surplus overhang. This has provided sellers with some confidence in the $0.05/lb increase nominated for January, but from what level? The major indices posted net gains of $0.09/lb for PE through November, while spot PE prices at the PlasticsExchange fell an average of $0.05/lb during the course of 2023. One major reporting agency initially estimated December pricing down $0.03/lb. It may revise back to flat, though, as another major index rolled its December prices steady.

Either way, writes the PlasticsExchange, “we would be shocked if (m)any processors purchased meaningful quantities of PE in December $0.09/lb higher than what they paid at the beginning of the year. Large buyers have negotiated large discounts and unofficial non-market adjustments along the way, which creates added opacity to real transactional pricing and gives added importance to our spot market transparency.” In all fairness, adds the resin clearinghouse, there is no single price for resin, as a whole range of prices are transacted within the industry on similar grades each day, “but there is a big difference in up nine and down five — it is not even directionally the same,” writes the PlasticsExchange. Domestic PE sales were down across the industry in 2023 vs 2022, and there were no monomer cost push pressures for support. The PlasticsExchange’s market-making division owns a significant amount of prime warehoused PE, which it uses to ensure a liquid market. “So, we would love to sell PE resin at prices up $0.09/lb for the year . . . if we actually could, and our trading partners have recently shared the same pricing sentiment. We do not intend to overly stir the pot here, we just call it like we see it,” writes the PlasticsExchange in its Market Report.

Spot PP trading on slow side

Spot PP trading was also slower the first week of January, but that was to be expected after a very active end to 2023. Solid restocking prior to year-end will likely eat into spot January demand. Homopolymer PP was the main seller the week of Jan. 2, split between prime and off grade. The PP market started the year firmer and a cent was added amid limited availability and rising costs. Prices might appear to have popped a bit more from the special December discount levels, which were not all that deep, but are still long gone. Polymer-grade propylene (PGP) monomer costs have continued to rise, and seem to have upward momentum, somewhat reminiscent of the year-ago rally, which was also based on supply constraints and PDH outages.

The spot PP market enters 2024 about $0.05/lb above year-ago levels, while PP contracts begin the year about $0.14 to 016/lb higher than 12 months ago. The overall higher prices are attributed to several strings of cost-push price increase which brought about wild market swings during 2023. The difference in the magnitude of spot and contract increases was largely attributed to spot margin compression due to weak PP demand and destocking of raw material and finished goods amid generally ample availability and plenty of excess capacity at North American resin production facilities.

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