TPE North American resin pricing, Sept. 27-Oct. 1: PE mixed; PP down; October contract increases of $0.03-$0.04/lb proposed

Market overview: The resin markets quieted last week with limited month-end trading activity, mixed polyethylene (PE) prices, and lower polypropylene prices. Offer volumes continued to grow, but relatively few spot transactions were concluded, according to spot-trading platform, The Plastics Exchange (TPE). Processors in need of material remain buyers, while most other market participants displayed caution. TPE CEO Michael Greenberg said that although there were last-minute railcars requiring disposition, resellers with uncommitted inventory were the featured sellers. September PE contracts are mostly settled, tacking on the nominated $0.05/lb increase, while average PP contracts increased $0.025/lb.

Energy markets followed the trend of recent weeks and moved in opposite directions, with November crude oil futurescontinuing to rally, jumping $5.09/bbl to end the week at $81.58/bbl. Natural gas futures eroded again, falling another $0.212/mmBtu to settle at $3.797/mmBtu on Friday. The crude oil : natural gas price ratio widened to 21.5:1, further expanding the benefit that natural-gas-based ethylene and PE producers have relative to those utilizing the crude oil chain for feedstocks.

Ethylene spot prices rallied last week, reacting in part to an unplanned production disruption. Spot demand was strong and transacted volumes were high as short-term monomer needs were sought. Spot ethylene traded every day with numerous transactions for September and October delivery confirmed. Deals were executed just below $0.34/lb on Monday to as high as $0.36/lb later in the week, with the final trade on Friday at $0.355/lb. Ethylene's net transaction price (NTP), a major component of ethylene contracts, was agreed at $0.39/lb for September, the same price as August.

Polyethylene's (PE) overall market was steady to $0.01/lb higher, more closely reflecting September's $0.05/lb price increase. Resellers have become good spot suppliers, seeking to take advantage of the bump in prices. Demand, however, has dulled at this higher level, and processors have shied away from procuring slightly discounted spot opportunities. The stage for this was set in the summer, according to Greenberg. "August demand was awesome as processors bought ahead, hedging against the increase, so many are along the sidelines content to work down their inventories," Greenberg said.

Prices amongst PE grades are consolidating, with materials that had been lagging, such as high-density (HDPE) blowmolding, having rallied more than other HDPE grades. Spot low-density (LDPE) prices, which gained a large premium this summer due to supply disruptions, have recently given back a few cents, while linear low-density (LLDPE) film-grade prices have been increasing, starting to close the gap. Spot PE exports have been challenging, while the large base of contracted/direct export volumes remains intact, providing producers with demand for nearly 20% of their monthly PE sales.

Propylene's spot market was quiet during September, but saw better activity this week with a few spot refinery-grade propylene (RGP) transactions confirmed. A couple trades for September and October delivery crossed at $0.455/lb, then October traded at $0.4625/lb, above the tight penny range seen during the month. Spot polymer-grade propylene (PGP) went untraded again, and buyers and sellers were far apart with their price ideas ranging in the mid-to-high $0.50s/lb. Spot PGP last traded a couple weeks ago at $0.575/lb. September contracts were priced at $0.60/lb, while October contracts have been nominated both steady and with a $0.02/lb increase.

Polypropylene (PP) spot prices eased about $0.005/lb this week, and are now off about $0.015/lb from their mid-September peak. Although the contract market has endured a $0.025/lb increase, tracking the gain in September PGP monomer contracts, tight supply/demand dynamics initially placed a premium on spot material. The spot market then encountered resistance as prices for railcars of generic-prime homopolymer approached $0.70/lb and have since backed off. Greenberg noted that the offgrade market has come under pressure, and with few export outlets available, sharp discounts to the prime market have developed. "While resellers are not awash in resin, many are eager to liquidate surplus materials at this elevated price level," Greenberg said.

Resin producers secured the better part of their price increases in September and some are seeking to lift prices further in October. There is currently a $0.04/lb increase nominated for PE and as much as $0.03/lb floated for PP. "While demand has eased, and at the moment, the market does not seem to have much momentum, tight supplies can maintain upward pressure on the market-at least for the beginning of the month."