TPE North American resin prices, Oct. 25-29: PE steady, PP down a penny

Market overview: Spot resin trading picked up as October drew to a close, with polyethylene (PE) prices mostly steady while polypropylene (PP) lost another cent. Spot-trading platform, The Plastics Exchange (TPE), reported that despite a $0.03/lb price-increase nomination, October PP contracts fell $0.015/lb, along with polymer grade propylene (PGP) monomer. PE contracts had been nominated to increase by $0.04/lb, and while some producers have agreed to push off the increase until November, others held firm to enforce the increase in October. Several producers have already issued a $0.05/lb price increase for December PE contracts.

Energy markets: December crude oil futures eased $0.26/bbl to end the week at $81.43/bbl, while natural gas futures snapped a 5-week losing streak, rebounding about 10%. The December contract jumped $0.345/mmBtu to settle at $4.038/mmBtu on Friday. The crude oil : natural gas price ratio contracted sharply, but remains historically wide at 20:1, with parity at 6:1.

Ethylene spot prices continued higher, with material for November delivery adding more than $0.015/lb to climb back above $0.40/lb. The September net transaction price (NTP) was $0.39/lb, with October not yet established. TPE CEO Michael Greenberg noted that it has been some time since spot ethylene has changed hands above the last quoted NTP. TPE said planned and unexpected cracker outages contributed to a shortage of monomer. Ethylene markets were made into 2011, with transactions seen above ethane plus $0.14/lb. "While the spread between ethane and ethylene is quite volatile," Greenberg said, "a premium closer to $0.07/lb has historically been seen."

Polyethylene's (PE) spot market was active last week, although prices were only steady. Confusion around October PE contracts kept the flow of inquiries strong, with buyers looking to by without the price increase. Railcar offerings were strong, with some resellers requiring last-minute disposition for unsold resin. "The October price increase has come down to the wire and then some," Greenberg said, "as we venture into November, October prices are not fully settled." TPE noted that a major resin consultancy suggested that the October $0.04/lb price increase wasn't taking hold, and while some PE producers have pushed the increase off until November, others remain steadfast with plans for the October increase.

Propylene prices edged higher in limited trade, with refinery-grade propylene (RGP) moving at up to $0.465/lb, a half-cent above last week. There were no spot PGP trades seen, but material was offered a tad lower to $0.55/lb. PGP last traded at RGP-plus $0.07/lb. The spread has come in dramatically from the mid-$0.20s/lb, which was seen earlier in 2010, with the premium pushed back towards to the historic average of around $0.05/lb in anticipation of additional supplies from Petrologistics new propane-dehydrogenation plant, which is now producing on-spec material. October PGP contracts settled at $0.585/lb, down $0.015/lb, and November contracts have not yet been formally discussed.

Polypropylene (PP) prices gave up another $0.01/lb last week, which is now trading about a nickel below the September peak. October PP contracts finished $0.015/lb lower, despite increase nominations. "A difficult export environment and slackened domestic demand, fueled by negative market sentiment," Greenberg said, "has caused producer inventories to build." There were large supplies of widespec railcar material and packaged prime supplies from Houston area traders were seen into month end. The spot market is further pressured by weaker monomer costs and the anticipation of lower PGP contract prices for November.

"The resin markets were interesting in October," Greenberg said. "Spot ethylene costs rose, contributing to producer resolve to enforce their $0.04/lb price increase. However, it has not stuck industry wide, and consequently spot PE margins compressed somewhat from very wide levels."

Greenberg believes that producers that delayed increases until November will likely be firm in their intent to raise prices in the new month. PP contracts also bucked their $0.03/lb nomination, ultimately falling $0.015/lb, which was commensurate with the drop in October PGP contracts. The PP market is entering November with a slightly negative tone, while PE is currently looking a bit stronger.