Volume: Increasing
Price: Steady / higher
The Polypropylene market is entrenched in a very difficult environment. Record high Crude Oil prices are helping to sustain record high Propylene monomer costs that were initially elevated due to refinery outages and alternative demand from the gasoline market. A weak dollar nearly doubled Polypropylene exports this year, helping resin producers to maintain high operating rates, but domestic processor throughput has suffered from the high priced resin, which has damaged end-user demand.
Polypropylene producers have been compelled by higher feedstocks costs to institute a series of margin saving price increases on their resin contracts. Polypropylene buyers, whose contracts are often tied directly to monomer prices or a major benchmarking index, have had little choice but to pay the higher price for resin. The most recent increases for November resin contracts were nominated as much as $.08/lb higher and will likely settle $.06-.07/lb higher to mostly keep pace with the $.0725/lb increase on November monomer contracts.
The spot Polypropylene market is developing a large spread between much higher priced branded prime contracts, lower priced, but still expensive generic prime spot railcars, and good (and sometimes not-so-good) widespec resin. Given the high cost of resin many processors are even seeking regrind/repro for the first time to help save money.
The large range of prices is evidence of a cost-push increase with weak demand, where sometimes even well-priced resin has a hard time finding a buyer. Producers might afford to hold on to some extra resin and keep the branded market firm, but the appearance of generic prime resin in this price increase environment shows that sales are hurting too.
We anticipate that this challenging situation will continue to plague the Polypropylene supply chain until there is a significant break in feedstock costs. Even when more refinery capacity returns back on-stream, Crude Oil prices nearing $100/bbl will provide a floor to feedstock costs. In addition, while winter is still ahead, come the spring, the industry will begin stockpiling higher Octane gasoline (alternative demand from Propylene) for the summer driving season.
With spot RGP prices hanging in the mid-$50s/lb, there is talk of a further hike in monomer contracts for December business. In response, we have already seen both a $.05/lb and $.06/lb increase nominated for Dec resin contracts. So unfortunately, relief is not yet imminent.
Price: Steady / higher
The Polypropylene market is entrenched in a very difficult environment. Record high Crude Oil prices are helping to sustain record high Propylene monomer costs that were initially elevated due to refinery outages and alternative demand from the gasoline market. A weak dollar nearly doubled Polypropylene exports this year, helping resin producers to maintain high operating rates, but domestic processor throughput has suffered from the high priced resin, which has damaged end-user demand.
Polypropylene producers have been compelled by higher feedstocks costs to institute a series of margin saving price increases on their resin contracts. Polypropylene buyers, whose contracts are often tied directly to monomer prices or a major benchmarking index, have had little choice but to pay the higher price for resin. The most recent increases for November resin contracts were nominated as much as $.08/lb higher and will likely settle $.06-.07/lb higher to mostly keep pace with the $.0725/lb increase on November monomer contracts.
The spot Polypropylene market is developing a large spread between much higher priced branded prime contracts, lower priced, but still expensive generic prime spot railcars, and good (and sometimes not-so-good) widespec resin. Given the high cost of resin many processors are even seeking regrind/repro for the first time to help save money.
The large range of prices is evidence of a cost-push increase with weak demand, where sometimes even well-priced resin has a hard time finding a buyer. Producers might afford to hold on to some extra resin and keep the branded market firm, but the appearance of generic prime resin in this price increase environment shows that sales are hurting too.
We anticipate that this challenging situation will continue to plague the Polypropylene supply chain until there is a significant break in feedstock costs. Even when more refinery capacity returns back on-stream, Crude Oil prices nearing $100/bbl will provide a floor to feedstock costs. In addition, while winter is still ahead, come the spring, the industry will begin stockpiling higher Octane gasoline (alternative demand from Propylene) for the summer driving season.
With spot RGP prices hanging in the mid-$50s/lb, there is talk of a further hike in monomer contracts for December business. In response, we have already seen both a $.05/lb and $.06/lb increase nominated for Dec resin contracts. So unfortunately, relief is not yet imminent.
