Weekly Resin Report: Polyethylene Prices Continue To Slide

Date:Dec 07, 2016

Spot market activity has at times been just as volatile as its pricing. The trading desk went fromone of its slowest 

weeks, albeit shortened by the Thanksgiving holiday, to its highest volume weekof the year, reports the Plastics

Exchange (Chicago) in its Market Update. A steady, heavy flow of both fresh offers and processor orders resulted 

in the vast majority of do-able deals being brought to completion. Although energy and feedstock costs mostly moved considerably higher, resin prices continued lower, and that combination appears to have been a catalyst 

to spur good action. The polyethylene (PE) market was quite busy this past week, which spanned the end of 

November and the beginning of December. Spot material availability remained plentiful and, despite significant 

strength in the energy complex, PE prices continued to slide, with most grades shedding another cent. Incremental export demand has languished and Houston warehouses are currently full of resin with packaging lines running at 

capacity. Some of them are booked through the end of the year. Export demand perked up amid lower asking 

prices and the surge in upstream energy, but the log-jam in Houston could pose a problem if suppliers look to

purge inventory in December. November PE contracts were down $0.03/lb; processors have been limiting 

purchases,opting to work down inventories as they anticipate another decrease in December. In the meantime, 

buyers have been tapping the spot market, which has been well discounted to contracts, to fill in supply gaps along the way. As such, the PlasticsExchange reports seeing a notable uptick in demand for LDPE and LLDPE film 

grades. Although December resin markets often see sporadic activity, domestic demand is expected to continue 

to improve as purchases have lagged the past two months. Better buying activity will be somewhat offset by those processors desiring to limit year-end inventory. Polypropylene (PP) trading was very active, as spot supplies of 

commodity resin remained amply available and prices continued to slide. November PP contracts declined an 

average of $0.06/lb, while spot prime and off-grade levels, particularly homopolymer, have fallen further, leading 

some participants to expect additional contract relief in December. Polypropylene supplies—domestic production 

along with tough to gauge import volumes—have outstripped demand, maintaining downward pressure on prices. 

While the PP market has not beenmassively oversupplied, the burdensome overhang, coupled with overwhelmingly negative sentiment, has placed pricing power firmly in the hands of buyers. PP production margins have been 

compressed the past three quarters and have wiped away much of producers’ hard-fought margin expansion 

achieved during 2015. The PP market has had several failed rallies since the beginning of this summer, and this 

last down leg has brought prices back to the lowest level inseven years and are again compelling on a historic 

basis, according to the PlasticsExchange.