Resin Price Report: 2nd Week Of April 2023 - Significant price increases of several types of resins
Welcome to the Resin Price Report Update for April 2023. Here are some highlights of the report:
- Resin prices remain high and are expected to remain tight in the coming months.
- Significant price increases of several types of resins.
- Production of PE was limited due to force majeure circumstances.
- PP trading started April on a positive note, but it did not match the pace of late March.
- Falling prices in the ethylene and Polymer Grade Propylene markets.
- Mixed energy market as crude oil rallies and natural gas prices drop.
Resin Price Overview
Polyethylene prices increased in March despite low domestic demand and a weak spot market, thanks to the fourth active force majeure on Nova's cracker in Corunna, which disrupted monomer supplies and resin production. PE producers have another nickel increase on the table for April, and while rarely seen in 23 years, a PE decrease immediately following an increase is not expected. Prime Polyethylene prices held firm but did not advance in light of the March implementation, while Polypropylene slid another penny as PGP monomer prices continued to unravel.
Despite some caution from buyers taking a wait-and-see approach amid the shaky global economic outlook, some restocking is being seen due to discounted PP offers. April is expected to see a $.05/lb increase in PE export offers supported by strong crude oil prices.
However, Port of Los Angeles and Long Beach operations were largely shut due to a shortage of workers during the Good Friday holiday, a stark reminder of possible logistical issues in the event of a work stoppage. Meanwhile, low resin offers will help reinforce the validity of March's $.03/lb increase and keep buyers' focus on April's $.05/lb increase.
Detailed Resin Price Fluctuation
Resin Prices Stabilize, Prompting Processors to Replenish Their Stocks.
The use of discounted offers for PP resulted in positive feedback from some buyers who started restocking after prices began to drop. However, other buyers remain cautious due to the uncertain global economic situation.
Meanwhile, PE export offers saw an increase at the beginning of the month due to high crude oil prices. The Good Friday holiday caused a temporary shutdown of the ports of Los Angeles and Long Beach due to a worker shortage. The situation serves as a reminder of potential disruptions in logistics in case of a work stoppage. Union workers have been without an employment contract since July 2022.
Spot PE trading slowed down as most buyers fulfilled their spot needs with discounted offers at the end of March. High-density PE for Blow Molding and Injection saw the most activity, followed by low-density PE for Film and Injection. However, there was less interest in linear-low-density PE, according to the PlasticsExchange.
PE Production is Limited Due to Force Majeure Circumstances.
The production of PE was limited due to force majeure conditions, despite some reactors coming back online, as upstream inventories needed to be replenished. As the quarter ended, there was a significant sale of off-grade resin, reducing the need to offer materials early in the month.
The scarcity of resin offers will support the validity of the $0.03/lb increase in March and keep buyers' attention on the upcoming $0.05/lb increase in April. Moreover, there was a shortage of new railcars, adding to the challenges faced by the industry.
Declining Spot PGP Prices Impact the PP Market.
PP trading started April on a positive note, but it did not match the pace of late March. Market participants took a cautious approach as they evaluated the impact of declining spot PGP prices on the resin market.
Spot PP prices dropped by one cent due to the decline of the sharp first-quarter PGP monomer rally. However, a significant amount of PP was sold last week at the PlasticsExchange, largely because processors were restocking at attractive prices and some were buying in advance to meet their April and May needs. Co-polymer PP dominated completed business and continued to maintain a nickel premium over homo-polymer PP due to its greater availability.
The March PP contracts were mostly settled up by $0.08/lb, following the PGP cost-push contract increase. First-quarter contract gains were $0.26/lb for PGP, with some minor margin contraction varying by producers. At least one PP producer is proposing a $0.03/lb margin-enhancing increase for April, which could somewhat offset an expected cost-led price decrease. This month's PGP contracts are currently setting up for a significant decline, possibly in double digits.
Active Participation in Monomer Market Leads to Falling Prices
The market for ethylene saw moderate trading activity with average overall volume, resulting in falling prices. On Tuesday, April ethylene was traded three times at $.2175/lb, and a strip for May-June was completed at $.205/lb. April ethylene in Louisiana sold at a 3-cent discount to Texas, at $.1875/lb. The next day, back in Texas, April ethylene was sold at $.22125/lb and then higher at $.225/lb.
A few more deals were put together on Thursday before the market closed for the long weekend. Rolling April to May deliveries in Texas concluded three times with an April premium of $.0125/lb noted, and two more trades for prompt deliveries in Louisiana were solidified at $.195/lb. By Thursday afternoon, spot April ethylene had recovered most of its early losses but still fell by $.00375/lb during the week, settling at $.225/lb. Back-month contracts saw fractional losses and the backdated forward curve through the end of the year narrowed.
Polymer Grade Propylene Market Faces Pressure as Spot Prices Drop.
The Polymer Grade Propylene (PGP) market experienced moderate trading activity, with volumes lower than the elevated levels seen in the first quarter. The weighted average price for March was around $.60/lb, and April's spot prices significantly dropped as the bears took over and pushed prices lower due to resolved PDH production issues. On Monday and Tuesday, Apr PGP exchanged hands at $.44/lb, but prompt offers continued to decrease, and by Thursday, the weighted spot Apr PGP average settled just below $.4225/lb, resulting in a loss of nearly $.0425/lb for the week.
March PGP contracts settled up mildly to $.58/lb, with total first-quarter gains of a significant $.26/lb. However, based on the quickly deflated spot April PGP levels, it's expected that much of those gains will be wiped away. April contracts are expected to experience a double-digit decrease, although it's still early in the month and conditions may change.
Energy Market Mixed as Crude Oil Rallies on Opec+ Production Cuts and Nat Gas Prices Drop
The Energy Market saw a mixed performance during the shortened trading week. Crude Oil prices surged after OPEC+ announced a surprise cut of around 1.16 million bbls/day of oil output and domestic stockpiles fell by a larger-than-expected 3.7 million bbls.
On the other hand, Natural Gas prices declined by almost 10% due to bearish sentiment and warmer weather forecasts. May WTI rose by $6/bbl on Monday to trade as high as $81.69/bbl and closed the week at $80.70/bbl, with a net gain of over $5/bbl. Jun Brent Oil traded between $83.29 - $86.24/bbl during the week and finished at $85.12/bbl, gaining $5.23/bbl.
May Nat Gas hit its weekly high of $2.20/mmBtu before falling to a Thursday low of $1.99/mmBtu and closing the week at $2.01/mmBtu, down 20.5 cents on the week. NGL prices were also mixed, with Ethane up by nearly 3 cents to $.210/gal ($.089/lb) and Propane down by almost 3 cents to $.823/gal ($.233/lb).
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