Polyethylene (PE) and polypropylene (PP) prices hit new highs for the year last week, before PP lost a dime on Friday. Processors continued to seek materials both for immediate use and to fill inventory during this volatile geopolitical and economic time, the Plastics Exchange reported in its market update. The mini-feeding frenzy appeared to cool later in the week as the rapid rise in energy and commodity prices moderated, providing participants with a moment of reflection.
The price of polypropylene transactions varies considerably
Spot bids remained thin all week. Very few prime PP wagons were available and were priced based on March PGP plus margin. With spot monomer jumping, it was difficult to lock in transactions without a firm price, writes PlasticsExchange. PP transaction prices varied widely, with the high end of the market continuing to rise while some low end materials languished. Most good, low-grade PP cars showed up without a price, and the PlasticsExchange said it had to bid to see if the price was acceptable. For PE in both the Houston and domestic markets, buyers willing to pay the full $0.04/lb price increase designated for March contracts found resin. Overall, however, good volumes of PE and PP resins were traded last week, more by truck than by railcar.
Resin spot prices bottomed in December and had already risen during the first quarter. The most recent surge in demand was largely inspired by the Russian invasion of Ukraine, which could yet lead to much larger conflict and impact key energy and derivative supplies in Europe and the rest of the world. . Many key countries and companies have imposed sanctions on Russia, including the latest energy import ban announced by the United States, which will certainly impact trade flows in many markets, including the resin industry. These sanctions come at a time when the industry has already been hit by rising costs and prolonged logistical delays from packhouses and freight providers. Although upstream resin inventories have recovered from production disruptions a year ago, spot markets have remained tightly supplied. Any further disruption to the market and the delicate supply chain, whether geopolitical or otherwise, could further complicate resin markets and pricing. The gap between current resin price levels and 2021 record highs is quite wide, reports the PlasticsExchange, with spot PE grades up to $0.31/lb below peak prices. last year and PP prices $0.40/lb below last year’s peak.
Polyethylene trade remains high
Although less robust than in recent weeks, trading and private equity volumes remained elevated. Most qualities boosted earnings by another cent as rapid availability remained limited and overall demand was high. Low Density PE (LD) and Linear Low Density PE Film (LLD) were the main drivers last week, followed by LLDPE Injection. A handful of deals have been made on the rest of the other core PE grades. High-density (HD) PE blow mold, which had seen a significant number of buying interests and volumes changing hands over the previous two weeks, saw interest wane. In light of the weekend slowdown, most premium grades of PE remain barely available despite warehouses packed to capacity due to ongoing export logistical constraints, according to PlasticsExchange.
The slight slowdown in activity did not deter the collective pressure for a price increase in March, and some producers also offered an increase in April, averaging $0.06/lb. North American PE producers are riding on the moderate bullish momentum and keeping the market tightly supplied. They derive the vast majority of their feedstock from ethane (natural gas) and have a huge cost advantage over their international counterparts, who derive their feedstock primarily from naphtha (crude oil). Domestic PE producers have maintained high exploitation rates and seem comfortable building inventory rather than flooding the market with their excess supply. However, producers will need to find a way to export more materials in the future, especially as new production capacity is set to come online later this year, writes PlasticsExchange.
Polypropylene Homo and Copolymer Prices Reach Yearly Highs
PP trading was strong, although slightly slower from the strong activity seen in late February/early March, fueled by strong buyer demand on the heels of rising energy/material costs raw materials and the general uncertainty of supply. Tight supplies reduced completed PP volumes in the first half of the week as more deals could have been completed if more well-priced resin was available. Lower energy and commodity prices pushed buyers away in the second half of the week. Despite the pause for thought, the prices of Homopolymer (Ho)PP and Copolymer (Co)PP added a few extra pennies early in the week, sending both grades to yearly highs before reducing by a penny on Friday. last. Prime HoPP mid-funds were the best sellers this week on the PlasticsExchange trading desk, followed by high-end CoPP.
As a reminder, the lack of availability comes as upstream PP inventories have retreated from peak levels, so producers are in no rush to flood the market with material. Overseas imports remain an option and new deals have been booked, but vessel space remains limited, major ports are still congested and nearby warehouse space is very expensive. March PP contracts still point to high single-digit cost increases, but energy prices may have already peaked.
Read the full market update, including news on PGP prices and energy futures, on the PlasticsExchange website.