Despite Hurricanes Ida and Nicholas, which hit Louisiana and Texas respectively in recent weeks, spot resin trade has remained well below the active pace of the first half of 2021, the PlasticsExchange reports in its update. of the market. Producers have been restocking their resin stocks since the February frost, and although some polyethylene (PE) and polypropylene (PP) producers remain on force majeure or having sales allowances in place, resin supplies became more available, which hampered cash buying activity. Spot resin prices have come down and most grades of PE and PP are down another $ 0.02 / lb last week. Huge spot premiums have eroded as the fundamentals of supply and demand become more balanced. Historically, it is more common for spot resin to trade around the parity or at a price lower than contracts.
PE contracts have risen from $ 0.41 to $ 0.43 / lb since the start of 2021, and a total of $ 0.65 to $ 0.67 / lb since the market bottom in May 2020, including the latest successful $ 0.05 / lb increase implemented for July contracts. Producers failed to get another penny in August; Even though some limited production disruptions have occurred due to recent Gulf storms, it seems unlikely that nickel increases will be guaranteed in September, according to PlasticsExchange.
Proposed increase in PP margin improvement is unlikely to be successful
PP contracts rose $ 0.57 / lb in 2021, and a total of $ 0.885 / lb since the market bottom in May 2020. August PGP contracts rose $ 0.11 / lb to 0, $ 87 / lb. With spot monomer prices under pressure, trading in the $ 0.70, but more recently in the lower $ 0.80 / lb, PlasticsExchange expects September’s PGP contracts to drop a few cents. The monomer has been volatile, however, this could change. PP producers will look to offset this drop in PGP with another attempt to increase the margin from $ 0.03 to $ 0.05 / lb, although it seems unlikely they will be successful at this time. PP purchases for imports have slowed considerably over the past two months, as importers’ incentives have been drastically reduced by the rise in international resin prices and the massive increase in ocean freight, which may amount to around 0 , $ 35 / lb in terms of resin.
In addition, importers have been affected by long delays, as well as costly demurrage, postage and dumming costs, which have significantly eroded margins. Some delayed shipments continue to sail to US shores, so material is still unloaded at ports, but demand for new shipments has slowed considerably.
PE stocks hit record high
Both PE and PP producers have enjoyed extraordinary margins since the market took off in February, and their motivation has been to produce as many pellets as possible. In the meantime, international PE prices have been much lower than prices in the Americas, which has significantly reduced US exports of PE, contributing to a massive expansion of collective resin stocks upstream. This includes an increase of almost £ 100million in August, bringing PE supplies to an all-time high of just under £ 5.9 billion. PP stocks have also rebounded significantly to over £ 1.6 billion, the highest since last May, before producers cleared their stocks through export markets during the end of the quarantine. COVID.
Domestic demand for PE and PP has been very strong, especially in the past five months. Part of this was in response to increased consumer demand and relocation efforts, with more products made in the United States for domestic consumption rather than being imported from abroad. However, PlasticsExchange believes that another driver of demand, particularly in the past two months, is from processors purchasing additional volumes to help fill available inventory to guard against possible disruption in the supply chain. ‘supply during this hurricane season. Some of this demand may have been borrowed from future orders. Now that resin supplies are more abundant and the PE export market is well below last year’s levels, continued pressure on spot prices may cause contract prices to erode in the fourth quarter, writes the PlasticsExchange. Demand for PP remains strong but is also susceptible to a market correction as the forward costs of PGP monomer are posted at increasing discounts from fast levels. If the monomer market were to decline, some of the increases in PP that improve producers’ margins may also start to fade.
There are still potential issues ahead as we are in the middle of an active hurricane season and have already seen two disruptive storms affecting resin production. We advise general caution in general in the resin markets, but stay tuned to market developments as changes can occur quickly.
EP spot prices ease
PE trading saw average volumes change hands in the week of September 13, as domestic spot prices returned lower after just over two weeks of stability. Nicholas pulled a high density (HD) PE unit in Texas due to widespread blackouts, apparently having no impact on the somewhat bearish sentiment in the market. Injection of HDPE, 7 and 20 cast irons, is still difficult to obtain, keeping the highest premium of all grades of PE. But like HDPE Blow, the injection material is also starting to show a little more. Spot prices for high molecular weight films are down about a dozen cents from the peak. Low density PE (LD) and linear low density PE (LLD) film qualities were also observed to decline as supplies improved. PE producers have also raised force majeure in recent weeks, but at least four companies still have them in place. PE prices are likely to continue to decline and buyers will continue to trade for relatively smaller quantities anticipating lower prices in the future.
PP spot prices are falling
PP spot prices fell amid slower activity, moderate to lower demand and growing inventories. A good flow of homopolymer PP cars has been proposed, reaching the full range of fractional melts up to the melt-blown material of 1500 melts. PP copolymer resins were also well represented. Resellers were seen offloading inventory, but the PGP surge caused PP producers to remain fairly firm on their spot prices, which kept the PP from falling further, while patient buyers took a step back. Although upstream PP stocks can be considered large, if not robust, growers have not necessarily offered their full availability of materials, still withholding some as a precaution during the hurricane season, which also occurs against a backdrop of lack of imports to fall back on like a back-up valve. A handful of PP manufacturers remain on force majeure, also.
Read the full market update, including updates on PGP prices and energy futures, on the Plastic exchange website.