TPE North American resin prices, Dec. 13-17: PE steady; PP up; $0.12/lb increase on tap for PP in January

Market overview: Spot resin-trading activity was good last week, with mixed prices and an increase in short-term supplies. Polyethylene (PE) prices were mostly steady, according to spot-trading platform, The Plastics Exchange (TPE), although its benchmark high-density (HDPE) blowmolding grade was down $0.005/lb. PP prices continued to rally, adding another $0.01/lb, as they built on the previous weeks' gains. In December, PP contracts increased $0.03/lb, rising in tandem with polymer grade propylene (PGP), and they are poised to move higher yet in January. The December $0.05/lb PE price increase remains in negotiation, but TPE CEO Michael Greenberg notes that weak monomer prices make a timely implementation "questionable", but Greenberg also said that no producers have yet conceded to a delay.

Energy markets: Oil and gas continue to move in opposite directions as February becomes the front month. February crude oil futures edged $0.29/bbl higher to end the week at $88.60/bbl. February natural gas fell sharply, dropping $0.325/mmBtu to settle at $4.103/mmBtu on Friday. The crude oil : natural gas price ratio moved back out to the very wide level of 21.6:1.

Ethylene spot prices shed less than a penny in active trading, with ethylene for December delivery trading several times on either side of $0.45/lb, with the week's final spot transaction at $0.4475/lb, down from $0.455/lb in the previous week. After rallying sharply in October and November due to planned and unexpected outages, spot ethylene prices have given back about $0.09/lb. A few previously downed crackers have just returned on stream, and at this time, only 5% of capacity remains off-line.

Polyethylene (PE) has stalled in its ascent, finding some difficulty moving still higher during December. While producers remain firm in their intent to implement the current $0.05/lb price increase, weak spot monomer prices and fresh resin availability indicate that the increase might be pushed out to January. Towards the end of the week, spot railcars began to emerge, Greenberg noted, complementing ample and well-priced supplies out of Houston, particularly for HDPE blowmold and injection, where reactors have returned back online. Linear low-density (LLDPE) and low-density (LDPE) film grades are offered but at premium prices.

Preliminary American Chemistry Council (ACC) data showed that total PE sales in November were just above 3 billion lb, roughly in line with October. Domestic sales increased by about 100 million lb to 2.45 billion lb, while exports saw a 100 million lb decline to 584 million lb. LDPE and LLDPE operating rates were both strong, above 90%, but operational issues restricted HDPE production to less than 75%, for a blended average of just 85% for all of PE, the lowest level since February 2009. Demand exceeded production in November, leading to an inventory draw of 160 million lb, leaving 2.81 billion lb of PE on hand to start December.

Propylene spot prices continued to soar, according to TPE, with refinery grade propylene (RGP) jumping another $0.04/lb to $0.60/lb. PGP went untraded in the spot market, having last changed hands at $0.65/lb earlier in the month. Outages have generated a force majeure situation, as the PGP market was bid higher to $0.69/lb this week with no willing sellers. December PGP contracts settled early in the month, with a $0.03/lb gain to $0.605/lb. Based on the current spot market, contracts will be much higher in January, according to TPE.

Polypropylene (PP) added another penny last week, with limited resin availability and materials currently trading above average December contracts, which increased just $0.03/lb commensurate with the PGP contract settlement. Spot monomer prices have jumped about $0.10/lb in December, which will lead to a steep increase ushering in 2011. PP nominations have already been seen at the January PGP increase plus an extra $0.02/lb, for a total proposed increase of $0.12/lb.

The ACC reported that PP demand in November was 1.38 billion lb, about the same as October. PP exports slipped by about 45 million lb to 101 million, amid weakness in the Indian and Asian regions, but domestic demand picked up the slack with 1.28 billion lb shipped. PP reactors ran a shade under 85%, and aggregate producer inventories were about 1.65 billion lb at the beginning of December.

Final thought from Michael Greenberg:

"The commodity resin markets saw some mild divergence this past week...there could still be some good spot resin opportunities presented as suppliers look to balance off their year-end inventories."