TPE resin prices, April 29-May 3: PE, PP slip $0.005/lb; Has the PE market’s peak passed?

Spot prices eased a tad and resin markets were off to a good start in May, with a steady flow of material in railcars and truckloads. Most polyethylene producers held out until the last days of the month before officially pushing off their April price increase, according to spot-trading platform, The Plastics Exchange, but now May contract invoices are marked up the same $0.04/lb pending negotiations. Polypropylene contract prices should see a slight decline, although a nomination was revised to only a penny decrease; buyers are still hoping to see at least $0.03/lb come out in May, according to TPE CEO Michael Greenberg. The spot export markets are slow and there is plenty of material in Houston.

TPE resin prices, May 3, 2013

Energy markets diverged once again, with June crude oil futures initially falling $3/bbl to $90/bbl, but then snapping back to recoup all the losses and then some. By Friday afternoon, the market stood at $95.61/bbl a net gain of $2.61/bbl -up approximately $9/bbl from the swing lows of only two weeks ago. June natural gas futures rallied early in the week, nearly making contract highs before tumbling. The market pierced below $4/mmBtu and then settled at $4.041/mmBtu, down $0.182/mmBtu for the week. The crude oil: natural gas ratio moved back out to 23.6:1.

Ethylene's spot market was subdued again, exhibiting light volumes and falling prices. There were just a few outright transactions seen, but it was enough to send the market for prompt material down $0.035/lb to $0.54/lb. Prices throughout the rest of 2013 were also marked lower but not quite as extreme, so the forward curve flattened about a penny providing a $0.03/lb discount by December. There are a few crackers down for planned maintenance but the peak of the turnaround season is behind us. Ethane was steady to a tick lower, moving just shy of $0.29/gal ($0.122/lb).

Polyethylene (PE) trading was good, material availability continued to improve, and most grades were accessible. Spot PE prices slid a half-cent as overall sentiment shades negative. After successfully standing down the $0.04/lb increase in April, processors quickly dismiss the likelihood of it taking hold in May. "Buyers tend to feel that the market peak has passed," Greenberg said, "and there is a chance that some of the $0.09/lb implemented in the first quarter will begin to peel off." Traders are generally seeking to limit their inventories instead opting for back-to-back transactions; spot exports are challenging, even to natural markets to the south.

Propylene was relatively quiet, as prices for prompt polymer grade propylene (PGP) rose fractionally to nearly $0.60/lb. The market has firmed a bit on production issues, Greenberg noted. The forward curve is still backwardated but has flattened more, and only a penny stands between current and end-of-year pricing. April PGP contracts were down a dime to $0.63/lb; market participants are expecting a decline of $0.01-$0.03/lb in May. Refinery Grade Propylene (RGP) remained flat in the very low $0.50s/lb.

Polypropylene (PP) spot trading was active, and Generic Prime prices shed a half-cent, while the offgrade market firmed a bit. Availability has swayed from basically any standard commodity grade at the end of the month to harder to move specifications in the beginning of May. After retracing $0.16/lb of the $0.21/lb tacked on during January and February, prices are getting back to a more comfortable level for processors, and buy orders are increasing. The general feeling is not that the spot market will snap back much higher, but rather that downside potential is limited from here. Market participants are anticipating another decrease for May contracts, somewhere between a penny and nickel. "Our guess is on the modest side," Greenberg said.

Final thought from Michael Greenberg

It was nice to see spot resin trading pick up with the onset of May. Polypropylene processors have drawn down their inventories and are returning to the market, both spot and contract, to procure material. A small decrease for May PP contracts is foreseen. Polyethylene buyers have yet to find contract price relief, unless one can consider the flat market in April as success. Spot PE is finding pressure as processors limit their purchases awaiting better prices. The export arbitrage to high volume India and Asian regions has been closed, further backing up resin in Houston. A fire at Formosa's Point Comfort Petrochemical complex hurt 14 workers, they are hopefully recovering swiftly - our best wishes.