Resin Price Report: Four — Count ‘Em — Four PE Force Majeures

Posted by Staff | Mar 29, 2023

Resin activity picked up last week, as buying perked up from the slowest pace of the year just a week earlier, reports the PlasticsExchange in its Market Update. With increased demand came a slight recovery in spot Prime levels, mainly in the polyethylene (PE) sector, which gained a penny across the board.

Yet another force majeure hit the resin market, this time declared by Nova Chemicals, as its Corunna Cracker in Sarnia, ON, faced an unplanned outage, limiting feedstock monomer to regional PE plants. For those keeping count, there are now a total of four active force majeures in place for PE.

Polypropylene (PP) prices consolidated and averaged out about steady. The top end of the market trimmed as elevated polymer-grade propylene (PGP) costs moderated, while the bottom part of the spectrum firmed as resellers' older and lower-priced inventories dwindled. This stable-to-slight gain snapped a two-week decline in spot resin levels, a reaction to global economic woes, such as high inflation, rising interest rates, and bank failures adding uncertainty to an already unsettled economy.

Even amid generally lackluster demand, the PE market seemed to resume its supply-constrained rally, and PP its cost-push uptrend, which both began at the onset of 2023.

Spot PE volumes improved during the week, as demand rose in light of another force majeure to hit the market. A penny uptick applied to all PE grades in the PlasticsExchange marketplace, reversing most of the previous week's losses, while putting the rally back on track. Completed volumes at the Chicago-based resin clearinghouse were well spread among the major commodity grades last week; low-density (LD) PE for Film emerged as the top mover.

Nova became the latest PE producer to declare a force majeure, joining Formosa, Ineos, and CP Chem. Amid these production disruptions, PE prices would be soaring if demand was even average. Instead, producers are struggling to add to the January $0.03/lb contract gains. The February increase fell flat and the renewed effort in March appeared to face the same fate, as both domestic and export spot markets have not supported the current increase. However, at least one index has now called for another $0.03/lb to stick, so we will wait to see how negotiations ultimately finish, said the PlasticsExchange. At least two PE producers have nominated a fresh nickel for April. In the PP sector, Prime co-and homo-polymer prices ended the week steady, as PGP was largely flat, and neither resin demand nor supply saw enough change to move the needle.

Co-polymer PP was the main mover across the PlasticsExchange platform, with Prime selling slightly more than wide spec. While homo-polymer PP trading was more limited, buyer requests began to grow. Since the beginning of January, resin availability has remained on the lighter side. There was a gentle stream of off-grade railcars, but Prime railcars were only available by request or through forecasting into production. Resellers' well-priced warehoused resin seemed to be drying up and their asking prices had jumped along with their replacement costs.

March PP contracts are set for another sizable increase, which will add to the $0.18/lb cost-push hike already implemented in January and February, minus some margin contraction that has varied by producer. Spot PGP prices have retreated sharply from peak levels seen earlier this month, reining in early estimates for the pending increase. Late in the week, one index suggested that PGP would still see a $0.13/lb increase, but with April monomer well-discounted to prompt, leaving next month vulnerable, even a dime increase for March would be plenty, according to the PlasticsExchange.

Market participation was heavy in ethylene, and propylene dealings were relatively light, with overall volume solid as prices diverged. The trading week began very quietly but gained steam with news of the unplanned outage at Nova, which has annual production of 1.8 billion pounds of ethylene. On Tuesday, ethylene for prompt delivery changed hands in Louisiana at $0.1825/L.

Read the full Market Update, including more news about PGP pricing and energy futures, on the PlasticsExchange website.

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