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Resin pricing: Contracts rolling flat for PE in May

Spot resin trading slowed to a more average pace and prices were mixed, according to The Plastics Exchange. Fresh railcars continued to flow into the secondary market, polypropylene more so than polyethylene. Reseller inventories are still thinning and some grades, particularly prime LDPE for film amongst others, are now outright challenging to source. Once again, it seems that PE producers have resisted the processor call for price relief as contracts are rolling flat in May.

Spot resin trading slowed to a more average pace and prices were mixed, according to The Plastics Exchange. Fresh railcars continued to flow into the secondary market, polypropylene more so than polyethylene. Reseller inventories are still thinning and some grades, particularly prime LDPE for film amongst others, are now outright challenging to source. Once again, it seems that PE producers have resisted the processor call for price relief as contracts are rolling flat in May. PP buyers fared slightly better, scoring a $.005/lb decrease for May, with indications for another and probably larger decline in June. Exports for both PP and PE are sluggish as relatively high Houston prices disable large spot deals.

The major US energy markets each maintained their several-week trends and moved further apart. July Crude Oil futures rose again, adding a solid $2.77/bbl and ended the week at $104.35/bbl, just off the highs. July rolled to the front month Natural Gas contract and prices softened further. The market settled Friday at $4.405/mmBtu; it was more than a dime off the lows, but still a loss of $.135/mmBtu. Spot rthane recovered the previous week's half-cent loss, reverting back to $.2875/gal ($.121/lb). The spot propane market finally had an up week, bouncing back a nickel to around $1.05/gal ($.284/lb). The Crude Oil : Natural Gas ratio widened to 23.7:1, which is about 3.5 times the level considered parity.

The spot ethylene market was a bit quieter and saw very little price change. Material for prompt delivery in either May or June changed hands about 10 times, but all within a half-cent range and on either side of the previous week's last price of $.5425/lb. The forward curve flattened a tad and is now backwardated just less than $.02/lb through Dec and about a nickel total by the end of 2015. Ethylene supply conditions in Louisiana are much improved now that CPChem's Evangeline pipeline is operational and Dow's final cracker at their Plaquemine complex is back on-stream. Nova however, has taken a cracker offline for scheduled maintenance, bringing the total offline units back to five - including those operated by ExxonMobil, Dupont, Williams and Equistar.

Spot polyethylene trading chilled a bit from the fervent pace seen over the past several weeks. While prices were only mildly mixed, a distinct difference has developed amongst grades. There is still plenty of HDPE material around and injection resins were a half-cent weaker. On average, spot HDPE is now only slightly higher during May & 2014

and even better supplies are expected with LA's ethylene supply constraints lifted. On the other hand, film grade availability is very snug; LDPE prices have recently been running higher and just added another $.005/lb, bringing the May rally to $.025/lb. LLDPE also added a half-cent, and while only a penny firmer so far this month, it has been the strongest of the group, now advancing $.04/lb since Jan 1. Polyethylene contracts are also up $.04/lb during 2014, thanks to the Feb increase, and producers are holding firm again in May.

Spot propylene trading activity was very limited. While no outright physical transactions were seen, there were willing sellers pressuring the market, offering material below the previous week's last transaction price of $.67/lb. Financial swaps for June PGP were done as low as $.66/lb. May PGP contracts settled earlier in the month at $.705/lb, down

$.005/lb. There has already been talk of a $.01-.015/lb decrease for June, but current spot levels indicate that a bigger drop could be in the cards. The PGP forward curve flattened a little, with discounts of less than $.02/lb now offered by Dec. RGP for May delivery changed hands a couple times a shade below $.58/lb.

The polypropylene market was softer, but buyers were not biting; spot prices shaved another half-cent, bringing the May loss to $.015/lb. Sure, there are plenty of last minute loads selling and shipping, but sizable orders are tougher to come by. There have been several large groups of railcars seen in the spot market, which could be an indication that actual contract orders are falling short of those forecasted. Processors in general seem to have scoffed at the $.005/lb contract decrease afforded in May and appear to be waiting for cheaper prices ahead. With spot PGP monomer already priced nearly a nickel below May contracts, the wait might not be too long - June starts next week.

Final thought from The Plastics Exchange CEO Michael Greenberg:

Overall resin trading in May has been very strong, making this past week, which was only about average, seem a bit disappointing. For the most part, market sentiment is negative and resin buyers, who are facing relatively high prices, are seeking some relief. In general, the first quarter of the past several years saw mostly double-digit increases for both polyethylene and polypropylene, but then marked weakness during the second quarter. While this year's increases, which at $.04/lb for each PE and PP, were somewhat benign, the down cycle has left something to be desired and buyers have expressed frustration. June should now bring a decrease that places PP contracts into lower territory; spot is already down $.045/lb for the year. Perhaps PE buyers will also get shown a little love, even if it's only a couple cents, the gesture would be nice and that market simply needs to breathe a little.

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