The spot resin markets were busy this past week; a larger volume of both polyethylene and polypropylene transacted and prices on average were again steady. There was a healthy flow of railcar offerings during the beginning of the week and some still required disposition past month end. The flow of fresh railcars then slowed as May began, but we will likely see this pick up again as the month gets further underway. In the meantime, most commodity grade resins remain accessible on a spot basis, packaged and some bulk, from national resellers and Houston traders although their inventory volumes seem to be a little lighter.
The major US energy markets were mildly mixed. Crude Oil prices continued to ease, shedding $.84/bbl to close at $99.76/bbl, erasing most of the gains previously achieved during April. Natural Gas futures prices again saw little change, the June contract added $.016/mmBtu to settle Friday at $4.658/mmBtu. The Crude Oil: Natural Gas ratio sits at 21.4:1. Spot ethane prices dropped another half-cent to $.29/gal ($.122/lb). Spot propane fell a sharp $.04/gal to $1.07/gal ($.303/lb).
After several weeks of heightened activity, the Spot Ethylene market slowed quite a bit. There were significantly fewer transactions in the prompt months while the forward markets remained fairly busy.
Ethylene for April delivery most recently transacted at $.56/lb, giving back $.01/lb of the $.03/lb gained in the previous week. May became the front month mid-week and rallied to just past $.575/lb. The forward curve remains backwardated, now to the magnitude of $.03/lb by December. One cracker started to return back to normal operations, but five other complexes now have units offline for maintenance amid the peak of this season's turnaround schedule.
There was good spot polyethylene business to be done this past week, while average prices again held steady. We did see some suppliers ease their asking prices to be more competitive with others, but all still within the current range. This is typical behavior in flat markets where sellers become willing to reduce their margins to enable sales. April PE contracts rolled flat and while a number of producers have active increases between $.03-.06/lb on the table, even this early in the month, we do not feel that there is a realistic chance for implementation. A small decrease might make more sense, but this could be tempered by a multitude of reactors currently challenged with production issues.
The spot propylene market remained quiet; although there were few actual transactions seen, prices were pressured. PGP for May delivery most recently changed hands just above $.675/lb, which was down nearly a penny. The forward curve flattened a little, the monthly discounts through December now only add to around $.02/lb. RGP again traded visibly around $.60/lb, but was subsequently indicated in the higher $.50s/lb. May PGP contracts were initially nominated at $.71/lb, flat from April, we think that based on spot levels a $.01-.02/lb decrease might make more sense.
Spot polypropylene trading picked up much to our satisfaction. Offgrade prices eased a tad, but Generic Prime still held firm. We might see a little weakness ahead as soft propylene monomer markets could lead to another modest decrease in May PP contracts. There is still ample availability of spot Generic Prime resin packaged in Houston and a good smattering of prime and offgrade warehoused around th3 country. Offgrade railcars are still flowing as normal and if processors continue to submit light contract orders upstream, Generic Prime cars could start to hit the market as well.
Final thought from The Plastics Exchange CEO Michael Greenberg:
The spot resin markets seem to be going through little cycles of activity surges and then periods of quiet. The first half of April was busy, the second was slow - we were happy to see solid trading return this past week. April PE contracts were steady and at best should be flat again in May; perhaps that elusive decrease might finally come through. PP contracts shed a penny in April, holding on to a half-cent gain for the year, and while May was initially nominated to roll over, we think the market might finally pierce into negative territory for 2014. Export interest continues to improve from the Asian region, but there is still a price gap to close before high volume arbitrage would occur. Latin American markets are a little soft creating export challenges to this natural market.