The slide in the spot resin market continued, as prices for both polyethylene (PE) and polypropylene (PP) fell as July ended. According to the Plastic Exchange, prices are yet to find a floor due to insufficient supply and overall lackluster demand as buyers calculate. Despite the fall in resin prices and slowdown in activity, domestic railcar offers continued to come in for prime and off-grade material and the heavy flow of offers raised buyer expectations of further declines. They’re floating low-ball bids to see if sellers will chase them; In some cases they do, reports Resin Clearinghouse in its Market Update. Still, the week saw some good demand from conventional spot buyers and supplies needed to fill supply gaps from others partly due to logistics snafus, it added. There was also export demand from Mexico, but some domestic processors were pleased with the discounted prices, locking in supplies until September.
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The slowdown in spot trading and activity came alongside higher monomer spot levels, which began to rebound in the latter part of July. Rising monomer costs may not be enough to offset oversupply in resin, as suppliers face rising warehouse storage and packaging costs and brand new resin units coming online in North America, Plastics Exchange said. Rail logistics on the West Coast have improved, but a ban on traffic to California that was supposed to end in July will continue into August.
Contract resin prices fall
The July PE and PP contracts were on the verge of ending with a decline from June prices and in the process dismissing producer price hikes. The July PE contract erases the $0.03/lb increase seen in May and is essentially the first real decline for contracts since December 2021. July PP, on the other hand, is on track to see its fourth consecutive monthly cut, which includes polymer-grade propylene (PGP) costs dropping pass-through to $0.04/lb rather than $0.03/lb, with a likely margin narrowing near $0.03/lb.
PE trading activity slowed down and spot resin prices on the plastics exchange trading desk were mostly stable at a penny lower depending on the grade. Completed volumes were down from a week earlier, but transactions across its market were more spread across low-density (LD), linear-low-density (LLD), and high-density (HD) PE resins, without a specific grade. Like a powerful move. Indeed, PE is generally well stocked, but availability of hexene and metallocene resins has tightened. This is especially true for shipments from Canada after major producers have announced Force major on hexane LLD and medium-density PE. Nevertheless, producers are still leaving spot levels to boost demand as warehouses are full to the brim and storage costs are rising.
The market will have to deal with even more capacity to come online. Shell’s CEO noted that the company will gradually bring new PE units online in Pennsylvania, and its site should be at full capacity by the end of the year. For July PE contracts, settlement ended $0.03/lb lower due to the confluence of heavy inventories and weak demand. Although July price initiatives are unlikely to be $0.03 to 0.05/lb, producers will try again in August with a nickel increase on the table. The question remains: Will these fundamentals continue and will August resin prices continue to erode as we enter the heart of the storm?
PP is another two cents off peeling
PP saw slightly higher trading this week, with prime co-polymer and homo-polymer PP grades changing hands, although spot levels still peeled off by two cents. Despite higher spot monomer costs, negative sentiment persisted and most buyers only expect further declines in PP resin prices amid negative price momentum.
PP availability improved in July after one producer picked it up Force major It removed its sales allocation last week and another earlier this month. Although railcars are moving, ready-to-go truckloads are in lower order and still command a premium. PP resin prices have really taken a hit and the current lack of demand has highlighted a slight overhang of inventories. But with reactors back to as low as 80%, a sense of upstream discipline is evident, writes Plastics Exchange in its weekly report. Despite the new production capacity out of Canada, which hasn’t really affected supplies in a meaningful way, PP Plastics is starting to look like a value buy, especially for the deeply discounted grade, according to the exchange.
Meanwhile, July PGP contracts are set to settle lower by $0.06 to $0.07/lb after the July PGP settlement fell by $0.04/lb. The expected decline in July PP includes margin erosion of $.03/lb. PGP may have found its ground, and the rise in costs should provide producers with some confidence to stay firm with their pricing as the dog days of summer unfold.
Read the complete market update including news on PGP price and energy futures Plastic exchange website
In other resin-related news
BASF builds MDI capacity
BASF is moving forward with plans for the final phase of expansion to the methylene diphenyl diisocyanate (MDI) plant at the Verbund site in Geismar, LA. BASF said production capacity will increase to 600,000 metric tons per year by mid-decade to support the continued growth of its North American MDI customers. The expansion plan began in 2018 with a staggered approach involving three investment phases. Investment in the final expansion phase from 2022 to 2025 is $780 million.
“This investment underscores our commitment to North America and strengthens BASF’s supply reliability and the competitiveness of our customers’ value chains in the region,” said Michael Heinz, BASF President and CEO. “As one of BASF’s Verbund sites, the Geismar location is ideally suited for the expansion of our MDI production due to its existing infrastructure, reliable raw material supply, skilled workforce and strong community support.”
MDI is used in the production of polyurethane and is important in a range of applications in the building and construction, automotive, appliance, footwear and furniture sectors.
CO2 Reduces fuel development in automotive plastics
Car manufacturers strive to meet sustainability goals and reduce CO2 emissions, they are finding a valuable ally in plastic. Every kilogram taken off a car’s weight reduces its CO2 According to a new report by Frost & Sullivan, emissions of about 20 kg over its operational life cycle.
The automotive plastics sector is expected to achieve a compound annual growth rate of 5.3% through 2028, rising from $31.29 billion in 2021 to $45.07 billion, according to a global business consultancy. For more information on the report, Global Automotive Plastics Growth Opportunities, check out Article inside Plastic today.