Weekly resin report: Spot PE, PP prices slide

Resin trading slowed a bit as we rolled into June: Offers were plentiful, prices were weaker and completed volumes tallied a tad below average, said the PlasticsExchange (Chicago) in its Market Update. A short-lived bull run in May was met with sharply lower energy and feedstock costs along with falling international resin prices, which has quickly shaken sentiment back to neutral, at best.

Spot polyethylene (PE) prices slid $0.01 to 0.02/lb last week, which threatens producers’ ability to implement their current $0.03/lb increase, though the April $0.03/lb increase remains intact. Spot polypropylene (PP) prices saw a similar decline last week, and the recent $0.045/lb cost-push increase enabled for May might already be peeled back in June. Resin export demand is strong, but at lower bids, which suppliers have not been eager to chase, at least not yet.

Spot PE trading began June in a mellow mood, which is not uncommon for the first week of a summer month, according to the PlasticsExchange. Spot PE prices were all weaker. Most came down a penny, though low-density PE for film and linear-low-density PE for injection, which had been building premiums, each slid a solid deuce.

Completed volumes were about average, as order flow through the PlasticsExchange trading desk was on the quieter side. This was not unexpected, especially in light of quickly changing market dynamics. In recent weeks, crude oil has dropped more than $10/bbl and geopolitical trade wars have been flaring, which has added a level of anxiety to both the U.S. and international resin markets. As international resin prices slide, export interest from all different regions have been flooding the low-cost producing United States; however, some buyers’ low-bid targets have not been attainable, resulting in many uncompleted opportunities. The trade tariffs with China remain unsolved, while fresh sanctions have just been placed on Iran’s petrochemical industry, which could be seen as bullish. One fire has just been put out with an agreement seemingly in place with Mexico, which would avoid tariffs on goods sold back to the United States in exchange for tighter border security. While the bullish market momentum that developed through May has been deflated, the PlasticsExchange said that it is not ready to characterize the market as bearish. A $0.03/lb PE contract price increase rolled over from May and is still on the table, but given the spot environment, implementation seems unlikely.

PP business picked up this past week. The PlasticsExchange reports that completed transactions were sizable, fairly well divided between prime and off grade, with homo-polymer (Ho) PP selling more commonly than co-polymer (Co) PP. This past week favored back-to-back deals over inventory sales, as some suppliers offered fairly attractive prices to move their material. The flow of spot railcar offers was fluid and prices were discounted $0.01 to 0.03/lb compared with the previous two to three weeks. Benchmark prices for both HoPP and CoPP each gave back $0.02/lb, as spot PGP declined sharply, indicating lower contracts ahead for June.

We have now entered hurricane season. Although PP supplies seem ample and loose at the moment, anything can happen over these next few months. Notwithstanding some PP production issues, the PlasticsExchange expects June PP contracts to follow monomer contracts lower in June. At the moment, the entire May increase is at risk of being wiped away.