TPE North American resin pricing, Feb. 1-5: PE steady, PP up $0.02/lb, tests $0.80/lb

Polyethylene (PE) spot prices were steady to a penny higher to start February, after adding about $0.04/lb in the last week of January, when the spot market indicated that contract PE would again rise in February. Mike Greenberg, CEO of plastics spot-trading platform, The Plastics Exchange (TPE), said that although it was strong exports that helped drive PE prices to this level, tight resin supplies and particularly high monomer costs are now driving the market. After successfully implementing a $0.04/lb increase in January, Greenberg believes that on their fourth attempt, producers will further press PE contracts higher in February. The current $0.08/lb initiative is comprised of the December $0.03/lb and February $0.05/lb nominations. Although current spot ethylene supports an increase, some feel that $0.08/lb might be a little steep. Splitting the increase to $0.04/lb in February and March might be better received, and, optimistically, Greenberg points out, “By the time March rolls around, perhaps the ethylene supply situation could be resolved and the entire increase no longer necessary.”

In slower trading, spot ethylene moved at around $0.52/lb. Supply issues are impacting the market, with the lack of production actually causing an ethylene supplier to declare Force Majuere, further limiting availability. Ethylene is only short for immediate front month delivery, however, as future months are priced at ever-increasing discounts indicating the expectation that ethylene will move lower as time goes on. Whether prices are in fact lower remains to be seen, especially since other crackers have scheduled maintenance over the next couple months.

American Chemistry Council (ACC) December production figures were finalized last week and showed PE producers remain disciplined, down-shifting reactors to run with just 86.5% capacity utilization. Domestic sales were good at 2.31 billion lb, and record exports of 909 million lb all added up to an inventory draw of 140 million lb. At just 2.7 billion lb, Greenberg says end-of-the-year producer inventories are considered quite light.

Polypropylene (PP) spot prices jumped another $0.02/lb last week, influenced by higher monomer costs. While spot refinery-grade propylene (RGP) monomer prices have stabilized in the mid-$0.50s/lb, the hugely influential polymer-grade propylene (PGP) contract price just settled February up $0.065/lb to $0.635/lb. PP producers now have a minimum target to shoot for while negotiating February resin contracts, although in addition to simply passing through monomer costs, there is still a residual effort to beef up margins. The normal flow of widespec railcars that do become offered seem to sell very quickly, while certain prime grades including PP random clarified and homopolymer PP Raffia, are, according to Greenberg, “outright difficult to source at reasonable prices.”

PP prices have quickly escalated back to the $0.70s/lb and even into the $0.80s/lb, causing a fair amount of trepidation in the market, and “terrifying buyers who are worried—not only about profitability, but also about their sustainability in this fragile economy,” Greenberg says. He has heard frustration from processors facing another increase in PP prices, with many concerned they will not be able to pass through higher costs without losing business. Greenberg believes the cost-push price-increase pressures will not cease in the near-term, especially given a seasonal period looming which generally draws monomer away from the resin market and into gasoline products. Greenberg says a propane dehydrogenation plant set to open in Houston in the middle of the year will soon be online bringing about 100 million lb of new propylene to the market monthly. The technology allows propylene to be sourced from natural gas, vs. oil-derived naphtha. The prospect of potentially lower prices, however, seems distant for those facing weekly price increases. “For those polypropylene buyers facing another $0.065-.085/lb price increase for February purchases, July relief is a long way off,” Greenberg says. —mpweditorial@cancom.com