Processors seek to shore up depleted inventories

Processors seek to shore up… Spot resin trading continued to hum along at a healthy pace the week of April 10, reports the PlasticsExchange (Chicago) in its Market Update. The resin clearinghouse saw a fairly steady flow of offers with commodity pricing mostly steady to lower. Processor spot buying continued to improve, motivated by an effort to sustain adequate inventories, which have been depleting. Spot polyethylene (PE) supplies are generally characterized as snug, with some grades outright difficult to source. Polypropylene (PP) slid another cent as sentiment becomes more negative: Most participants tend to agree that this cycle’s peak pricing for PP (and possibly PE) is already in place. Export asking levels have slipped, as sellers seek a level to clear incremental volumes of material.

Spot PE activity was very good, writes the PlasticsExchange, which adds that a large percentage of its viable transactions were brought to fruition. Producers implemented half of their $0.06/lb increase in March and, so far, midway through the month, they have been challenged to press spot PE prices any higher. While enforcing the second $0.03/lb is certainly still a possibility in April, some buyers believe that there is more downside risk than upside potential in pricing. Resellers have been shedding their inventories and are reverting more toward back-to-back transactions rather than procuring excess material now with plans to comfortably sell it in the future.

PP trading was sporadic: Demand remained unenthusiastic against ample, but not excessive, supplies, and overall prices slid another cent. Homopolymer availability has been significantly greater than copolymer. Prime PP railcars have been quietly offered into the domestic market at softer levels, while lower-end off-grade resin has been heavily discounted to sell offshore. Demand, both domestic and export, was damaged by three consecutive months of cost-push price increases which totaled $0.205/lb.

April PGP contracts have yet to settle, but as spot continues to weaken, contracts could potentially see a larger decline of $0.05 to 0.08/lb. Now that the monomer bubble has burst, PP processors are expecting a healthy share of producers’ costs savings, writes the PlasticsExchange. While lower prices are almost always welcomed by processors, a decrease in April will pose problems for some who are still trying to pass on prior increases downstream to their customers.

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