. Most polyethylene resins held on to their recent gains, although a couple film grades advanced further. At least half, and perhaps all of the $.04/lb price increase nominated for February polyethylene contracts will likely take hold. While spot PE prices certainly move around, contracts have been flat ever since securing a $.05/lb increase back in September. Spot polypropylene prices rebounded a penny this past week; it was the first gain in over a month. Feb contracts are settling down $.01/lb, and while there were nominations for a slight increase, most participants recognized that a modest decrease was probable, but the penny relief was a tad shy of some expectations, according to The Plastics Exchange CEO Michael Greenberg.
Energy markets moved higher as march crude oil futures traded in a very narrow range and ended the week at $100.30/bbl, it was a small $.42/bbl gain. The oil market has returned to the end of 2013 levels. Natural Gas prices continued their extremely volatile ways and had another huge $.85/mmBtu range. The March futures contract began the week under pressure, but then soared as another round of frigid temps and snowstorms gripped the Eastern half of the country. By Friday's close, the market had reached $5.214/mmBtu, a net gain of $.439/mmBtu. The crude oil: natural gas ratio contracted to 19.2:1. Spot ethane was relatively steady and ended the week a tick above $.40/gal ($.169/lb).
The ethylene market was fairly active, there were a number of outright transactions, but also a lot of multiple month strips and spread trading between months. A few crackers experienced seemingly minor production issues during the week. Ethylene forFebruary delivery traded down fractionally, as low as $.52/lb through Wednesday, but then proceeded to drop even further to $.50/lb, for a nearly $.03/lb weekly loss. The ethylene forward curve flattened considerably; while it still holds a contango shape through May, the peak premium shrunk to about a half-cent. The deferred months are still priced with discounts, but the backwardation is now much milder - prices throughout 2014 are currently all somewhat similar.
Polyethylene trading slowed this week and volumes were off. Spot PE prices were generally steady, but HMW and LLDPE film grades which have been the strongest of the bunch pressed higher. The spot PE market advanced during January, supported by strong domestic demand ahead of the $.04/lb Feb price increase, which has legs. Domestic sales in Jan were above 2.7 billion lbs, 170 million lbs more than the 2013 monthly average. These strong sales offset sluggish exports which dropped 250 million from December's 909 million lbs, which was just a couple railcars away from an all-time record. Still producers ran reactors in January nearly full out at 99% of nameplate capacity and ended up adding about 40 million lbs to their collective inventories, which entered February at 3.41 billion lbs, 107 million lbs above the 2013 average.
The spot propylene market continued to move lower in relatively light trading. During the first part of the week, PGP for February delivery changed hands several times on either side of $.70/lb; it then shed some more to most recently transact a shad above $.69/lb, the week's losses were almost $.02/lb. Feb RGP was slightly higher, ending the week a tad above $.60/lb, providing healthy margins to PGP. Despite a $.01/lb increase nomination, Feb PGP contracts settled down a penny to $.735/lb. PGP contracts had been up $.04/lb in each Jan and Dec. The PGP forward curve holds a distinct backwardated shape; prompt Feb. material is the highest price for 2014 with progressively larger discounts given until $.035/lb is achieved by December.
Spot polypropylene trading continued to chug along at a steady rate and prices rose $.01/lb. February PP contracts are bucking the $.01/lb increase nomination and instead shaving a penny, although some buyers were hoping for a larger decrease. Domestic demand backed off in early January as the monomer rally topped out; total domestic PP sales fell more than 100 million lbs from December's level to 1.285 billion lbs, about 40 million below the 2013 average. PP exports doubled from December's anemic tally, but at 57 million lbs were still only 4.3% of total sales. Producers ran their reactors at a healthy 89.5% of capacity and when the dust settled, they added 44 million lbs to their collective inventories, which at 1.447 billion lbs, was 43 million below the 2013 average.
Final thought from Michael Greenberg:
Spot resin trading fell off its fervent pace, but really just back to normal levels. Weather related transportation delays persist and led to the issuance of another logistics related Force Majeure event. Polypropylene contracts are sliding back a cent in Feb, although producers are looking to ride the spot Polyethylene market's momentum to implement some or all of their current $.04/lb price increase in February. However, traditionally higher volume Indian and Asian demand is still slack as the spot arbitrage does not work, which could complicate the PE issue. On the other hand, we also need to remain aware that the 2014 cracker and refinery turnaround season is soon approaching and restricted monomer suppliers jacked resin prices the past few years.