TPE resin pricing, Feb. 7-11: PE, PP slip $0.015/lb; contract hikes of $0.05 for PE and $0.03 for PP loom

Market overview: The spot resin markets continued to see heightened activity and good trading last week, as material availability increased and prices lowered. Spot-trading platform, The Plastics Exchange (TPE), noted that "for the first time in ages," there were generic-prime railcar offers for almost the entire slate of commodity grade resins. Producers' proposed February contract increases include $0.05/lb for polyethylene (PE) and $0.03/lb for polypropylene (PP). The prospects of implementation, however, aren't strong at this time, according to TPE.

Energy markets moved sharply lower in active trading, as March crude oil futures shed $3.45/bbl to finish at $85.58/bbl-their lowest close since the end of November. March natural gas futures dropped $0.40/mmBtu, falling more than 9%, to finish at $3.91/mmBtu. That marks a new low price for the March contract. The crude oil : natural gas price ratio expanded out to 21.8:1.

Ethylene spot prices moved higher in busy and volatile trading, as more than 200 million lb changed hands. Prices for February delivery ranged from $0.4425/lb to $0.485/lb, with the low set Monday and the high reached Friday. The net weekly change was a $0.0125/lb increase. In forward months, second-quarter delivered material sold for $0.45/lb. January ethylene's net-transaction price (NTP) was $0.4525/lb. February's NTP has not yet been confirmed, according to TPE.

Polyethylene (PE) spot prices slipped $0.015/lb on average last week amid restricted contract and demand heavy offerings. Processors are resisting producers third attempt to secure the current $0.05/lb increase proposal. TPE CEO Michael Greenberg noted that "hefty" upstream resin inventories have enabled sizable offers to the spot market, including generic prime railcars for high density grades, as well as linear low-density offerings. Low density supplies have also improved, and some of the premium gained in 2010 has begun to erode.

Propylene saw no spot-monomer transactions reported, although the market felt some downward pricing pressure. A fire at a natural-gas liquids (NGL) storage facility that supplies ethane to LyondellBasell ultimately did not create market-felt disruptions. Spot refinery-grade propylene (RGP) was offered at around $0.71/lb, holding near the previous week's price. Spot polymer-grade propylene (PGP) for February delivery last transacted at $0.75/lb, and offers last week were just above that level, while bids were well below. February PGP contracts have initially settled at $0.775/lb, technically a rollover from January.

Polypropylene's (PP) spot market continues to trim some of the massive cost-push gains added in December and January when contract prices spiked $0.20/lb. On average, spot prices dropped another $0.015/lb and have now retreated $0.06/lb over the last few weeks. TPE noted that some processors, anticipating further price declines, have limited their contract purchases to their minimum required volumes, contributing to the abundance of fresh railcar offerings. The proposed $0.03/lb price increase is doubtful for February, according to TPE, as buyers seek price relief in March.

Final thought from Michael Greenberg:

Despite February price-increase nominations, the commodity resin markets stumbled this past week, with average prices for both PE and PP falling $0.015/lb. With the upward momentum gone and hope of cheaper prices ahead, processors are limiting purchases, opting to work down their resin and finished goods inventories. Spot exports to India and Asia are quiet, but a steady flow is still headed to Latin America and an increase in European demand has been felt.