TPE North American resin pricing, Jan. 31-Feb. 4: PE up $0.01/lb; PP down $0.01/lb

Market overview: The spot resin markets were active, resulting in a very good trading week with polyethylene up and polypropylene down. Plastics spot-trading platform, The Plastics Exchange (TPE) noted that while supplies were somewhat restricted, a high percentage of deals closed. Spot polyethylene (PE) prices rallied along with monomer, as producers re-initiated their efforts to secure the $0.05/lb increase that has been floated since December. Although there is a $0.03/lb increase nominated for February PP contracts, spot PP prices shed another penny amid weak demand.

Energy markets were volatile and ended the week lower. March Crude Oil futures jumped early, reaching above $92/bbl, but gave back the week's gains and then some on Friday, ultimately settling at $89.03/bbl, for a net loss of $0.31/bbl. March natural gas futures spent most of the week in higher territory, but also gave back gains and ended $0.011/mmBtu lower to close the week at $4.31/mmBtu, almost $0.50/mmBtu below the previous week's high. The crude oil : natural gas price ratio was virtually unchanged at a wide 20.6:1.

Ethylene spot trading was active and prices moved higher spurred by several fresh outages and temperature-related disruptions. A high volume of material transacted throughout the week with the most recent trade at $0.4725/lb, up $0.0175/lb. The rising prices are concentrated in the front few months, and the forward curve has steepened with material towards the end of 2011 priced at about a nickel discount. The net transaction price (NTP) for January ethylene settled at $0.4525/lb, down $0.0325/lb from December.

Polyethylene (PE) spot demand was good and processors took advantage of well-priced offerings from traders still hanging in the market. Average PE prices rose $0.01/lb as fresh producer offers were limited in the first week of the month. Producers are currently undertaking a third attempt at implementing this $0.05/lb increase. TPE CEO Michael Greenberg noted that the timing is now better as monomer prices have firmed back above $0.47/lb. Although it is still too early in the month to gauge the probability of success of the increase, the market is indeed stronger.

Propylene's spot market was characteristically quiet with very little activity reported. Polymer grade propylene (PGP) went untraded, while spot refinery grade propylene (RGP) transacted early in the week at $0.71/lb, which was down $0.015/lb. February PGP contracts have initially settled at $0.775/lb, which was the same as in January. Greenberg noted that PP buyers probably do not need to be reminded that January PGP contracts were $0.17/lb higher.

Polypropylene (PP) spot prices continued to drop, slipping another $0.01/lb this past week, and are now $0.045/lb off their recent highs. Although the contract PP market, which is mostly tied to PGP, took the full $0.17/lb January price increase, weak demand has made it challenging to sell spot PP resin at normal historical premiums above the price of monomer. Greenberg said the initial flat settlement of February PGP contracts should provide processors "ample opportunity to pass the huge January increase downstream, the market will then be looking for price relief in March."

Final thought from Michael Greenberg:

The beginning of February has seen commodity resin prices moving in opposite directions. PP prices are easing, giving back some of the massive gains that resulted from a jump in monomer costs during December/January. PE prices are again firming, supported by their own recent spot monomer cost increases. Spot export resin demand is muted based on price, although a normal flow of material is flowing to Latin American markets. European traders are sniffing, while Asian traders have cheaper alternative sources. There is still plenty of time to see how the domestic market will come together in February.