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  Past Reports
Weekly Market Update
Market Update
February 26, 2021


The resin market continued along its wild ride; supply shortages intensified and once again, buyers sought more material than was available, so prices accelerated their ascent in near-parabolic fashion. Processors continued to flock to the spot market this past week and they scooped up every reasonable offer, after those were gone, they proceeded to grab the unreasonably priced offers too. As such, our market prices continued to climb, sometimes twice per day and by Friday’s close, average spot Polyethylene prices had tacked on $.10/lb, while Polypropylene levels rocketed another $.12/lb higher. Though some processors fell off, not willing to chase material in this seemingly ever-rising market, there was still a steady stream of demand and sometimes strong surges too. Some buyers became more liberal with requirements as crises demand creativity, many have expanded their typical technical specifications and packaging requirements to accommodate available material until better market conditions eventually return.

It has been two weeks since a massive winter storm struck the Houston area knocking out power and shutting down the entire Petrochemical producing region, including some 80-85% of US Polyethylene and Polypropylene production. Resin supplies were already reeling from a series of other disruptions that have plagued the industry for the past 6 months so the market was in no condition for another wallop, yet this storm packed a punch like a winter hurricane. Although some production facilities began to restart near week’s end, at least 2 billion pounds of resin production will be lost, adding to the woes of processors, many already facing reduced supplies from previous Force Majeure driven allocations. It is too early to tell how many resin reactors will smoothly restart in early March, as many critical supply chain components were also disrupted, but when they do, we expect a sizable amount of startup resin and rough offgrade to be made prior to Prime plastics production.

Once the mid-Feb storm hit, there was little doubt that Polyethylene producers would successfully implement their $.07/lb increase onto February contracts, bringing total gains to $.36/lb since June. Could it get worse? Yes. On Friday, a fire at the Pemex Cangrejera Petrochemical complex in Mexico, shut down yet another major Polyethylene production facility, further restricting PE resin supplies. This may very well be the catalyst that will carry the next $.07/lb increase which is already on the table for March. On the other hand, this new disaster could also be a blessing in disguise, because without a good outlet for its Ethane, Pemex might be forced back to the negotiating table and resupply the giant Braskem Idesa complex with Ethane, which they had cut off in December. It was this very conflict that had triggered another leg to the resin rally in Dec/Jan. Braskem needs the Ethane feedstock to crack into Ethylene and then turn into Polyethylene. It’s perhaps wishful thinking, but still logical; however, in the meantime, the North American resin market just lost more critical Polyethylene production.

In 2020, about 40% of North America Polyethylene production was sold into the export market. Producers kept substantial inventories on hand to facilitate overall sales, and this cushion is being drawn down to help fill domestic contracts. While a good portion of these exports were contracted or otherwise sold directly through formal sales channels, the rest of the exports have basically been spot and recently these type of incremental sales have slowed to a trickle, with uncommitted resin instead diverted into the domestic market. In an ironic flip of international trade, Polyethylene imports are also beginning to sail to the US. Still, spot supplies throughout the chain have been depleted, and while aged resin somehow comes out of the woodworks as prices rise, many resins are outright difficult to find.

The vast majority of HDPE Blow Mold resin is produced in the Gulf and available materials are increasingly challenging to source. Blow mold prices have risen the most among PE grades, gaining $.26/lb in Feb and $.42/lb since the beginning of the year. High Flow LDPE and LLDPE resins for color, compounding and injection molding are practically as scarce and supplies of HDPE for injection molding have been thinning by the day. A good percentage of LDPE and LLDPE film grade resins are made in Canada and unaffected by the Houston storms, but it matters not, few fresh offers have appeared in weeks. Ethylene costs have rallied along with resin, providing a level of underlying support. Spot Ethylene has reached $.515/lb, the highest since 2014.

Polypropylene conditions have tightened further, creating an untenable environment. Producer’s collective inventories had sunk to the lowest level in our records, just 17 days of monthly sales, and that was even before the Houston storm shuttered 85% of US PP capacity. The added shock has driven availability even lower and resin prices screaming to new record levels. Spot Polypropylene prices have jumped in leaps and bounds, often scoring $.05/lb daily gains to reach levels in the vicinity of $1.50/lb and higher, which is up an extraordinary $.50/lb during the month of February and $.67/lb in the first 2 months of 2021. Contract buyers saw a lesser increase of $.33-.34/lb in Feb, which included a cost-push increase of $.28/lb, as Feb PGP settled at strategically tempered $.885/lb, plus a margin increase of $.05-.06/lb. However, few contract buyers were satisfied with the partial allocations due to widespread Force Majeure declarations, and consequently also ran to the spot market for supplement supplies.

Amazingly overall resin demand has kept up surprisingly well. Sure, some processors that make price sensitive commodity products are just sitting this one out, walking away from non-essential business for the time being. Others with downstream contracts, especially for proprietary products with long term customers that cannot easily pass through rising costs (though anecdotally there is definitely success in short-term downstream assistance) acknowledge that perhaps they will not make money in the first half of 2021, but in the bigger picture, continuity and loyalty trumps the bottom line and so they are accepting today’s reality and paying up for resin.

Indeed, there is a lot of PP coming in from overseas, and we have imported thousands of tons ourselves to maintain liquidity to our market, but we still estimate an industry shortfall in the time ahead. Of course things could change as more industry orders based on price sensitive elastic demand falls away, but there is plenty of new inelastic demand that was not even a consideration in the past. For instance billions of face masks and syringes will be made from Polypropylene and with what the government and insurance companies are paying for vaccines, does it really matter if the couple ounces of resin to make the syringe costs $.18 or $.35 or even $5? It is completely new inelastic demand and this type of buying does not stop as the price rises.

These are truly unprecedented times, in the 21 years we have been making markets / supplying resin, nothing has come close to this supply /demand imbalance. Polypropylene was half the price a few short months ago, and it seemed to be getting too pricey back then. A couple of my mentors that have been around forever were initially comparing this market to the first resin crisis in 1953 and then the oil embargo market of 1973, but we have seemingly already surpassed those relative shortfalls, as there is a different magnitude of supply / demand than generations ago. The market seems to still have legs, but we are also in unchartered territory, so anything can happen. Parabolic markets make their biggest moves in the final throes, try to avoid the peak before it busts, because when it does, it can bust hard, and none of us want to be caught up in that. Indeed, this is a rough one, but to quote yet another industry mentor, eventually, and we don’t know when, this too shall pass.

Total Offers 7,947,990 lbs Spot Contract
ResinTotal lbsLowHighBidOffer
PP Homo1,733,472$1.280$1.490$1.350$1.450
PP Copo1,530,368$1.350$1.550$1.400$1.500
LLDPE - Film1,507,840$.850$.950$.850$.900
LDPE - Film1,210,736$.940$1.050$.950$1.000
HDPE - Inj911,288$.840$.940$.870$.920
LLDPE - Inj543,200$.825$.935$.870$.920
HDPE - Blow Mold268,586$.930$.990$.950$1.000
HMWPE - Film242,500$.890$.940$.870$.920
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