PGP and PP resin contracts are dropping $.015/lb in March; they had also eased $.01/lb in Feb. After jumping $.04/lb in Feb, polyethylene contracts should roll steady in March, as there is no viable increase on the table until April. Spot exports are very difficult, the Asian markets have been swimming in resin and prices from Houston do not work. Although the US dollar has slid to $1.39/Euro, a level not seen since Oct 2011, European traders are still unimpressed with US resin prices.
The major US energy markets fell substantially. Hello 90s - April crude oil futures are back in the double digits after falling $3.69/bbl to end the week at $98.89/bbl. Natural gas is also trading back to more familiar levels, leaving this winter's $6+/mmBtu spike high in the past. The April futures contract chunked off a sizable $.193/mmBtu to settle Friday at $4.425/mmBtu. The crude oil: natural gas ratio was nearly steady at 22.3:1.
Spot ethane prices also entered a new decade, closing the week at $.2925/gal ($.123/lb), a loss of almost $.03/gal.
The spot ethylene market was fairly busy with sporadic spurts of activity while a couple of crackers came back on stream. Ethylene for March delivery quickly jumped about $.015/lb to $.5275/lb, but the market then proceeded to give back the gains and trade several times at $.51/lb. The week ended with a flurry of spot deals at $.52/lb to record a gain of nearly a cent. The forward curve maintained its backwardated shape providing varying decreases each month until the December discount reaches almost $.02/lb. Several crackers are scheduled to come offline for planned maintenance during April and May.
Spot polyethylene trading improved, but there were still more sellers than buyers and prices slipped $.01/lb across the board. While there is a $.06/lb increase nominated for April, the lull in price increases during March has reduced buyers' urgency and sapped some of the markets upward momentum. The spot polyethylene export arbitrage is closed to most markets which does not help either. Preliminary reports indicate that domestic PE sales were just 2.45 billion lbs, 275 million lbs below Jan and about 80 million lbs under the 2013 average. PE exports in Feb dropped to 575 million lbs; it was 19% of total sales and more than 70 million lbs below the 2013 average monthly pace. Producers were wise to the slack demand and cut reactor rates to just 83.5%, the 2.89 billion lbs of PE produced was 450 million lbs less than the previous 2 month average and the lowest since May 2012. So all in, there was a 145 million lb upstream inventory draw and producers entered March with 3.144 billion lbs on hand, 155 million lbs below the 2013 average.
There was good action in the spot propylene market. PGP for March delivery changed hands at least half a dozen times between $.695-.70/lb; the most recent transaction was at $.6975/lb, for a weekly gain of a quarter cent. March PGP contracts found settlement at $.72/lb, which was down $.015/lb from February. This contract price relief was smack in the middle of our prediction for a $.01-.02/lb decrease. The PGP forward curve flattened slightly, but remained backwardated to the tune of nearly $.03/lb by December 2014. March RGP has been jumping around in the low-towards-mid $.60s/lb.
The spot polypropylene market was slow again and prices declined $.01/lb. March polypropylene resin contracts are settling down $.015/lb which is in-line with the PGP monomer settlement. However, the modest price relief does not seem to be revitalizing demand, which remains weak. Preliminary reports estimate that domestic PP sales were just 1.14 billion lbs, 183 million lbs below the 2013 average and the second worst demand since May 2011. At 57 million lbs, Feb exports were the same as in Jan and 15 million lbs above the 2013 average, but it still represented less than 5% of total PP sales. Reactor rates were cut to just 80%; the 1.243 billion lbs of PP produced in Feb was the lowest in 3 years and the 2nd lowest since Dec 2009. Still, producers built 45 million lbs of collective inventory, beginning March with 1.49 billion lbs on hand - just a few million lbs below the 2013 average.
Final thought from The Plastics Exchange CEO Michael Greenberg:
Spot resin trading increased this past week, but still fell short of exciting. Purchasing activity was unenthusiastic again and prices for both polyethylene and polypropylene shaved $.01/lb among all commodity grades. March PP contracts are following PGP contracts down $.015/lb in March; PE contracts should roll steady as there is not an industry wide price increase this month. Polyethylene producers have had such pricing power for the past 20 months that there is really no downstream consideration for price relief - just whether or not a nominated price increases will take hold. It has been two forevers since there was actually a full polyethylene contract price decrease, if my memory serves, a deuce last came off in Nov 2012.