The spot resin markets saw their most active week of the month, according to The Plastics Exchange. Railcars of both PE and PP were plentiful with generic prime and offgrade well represented. While sentiment weighed heavy, most prime grades of polyethylene and polypropylene managed to hold steady price-wise. There were, however, several instances of discounts afforded by sellers to enable transactions. Houston traders, many of whom felt obligated to buy material from favored producers in Feb and March, still have plenty of material on hand as exports remain very difficult. This could pose a particular demand issue for spot PE in April, as minimal quantities are actually sought in favor of turning existing inventory. Polyethylene contracts were steady in March; Polypropylene decreased $.015/lb.
The major US energy markets staged a late week surge to post weekly gains. Crude oil continued to press higher while trading in a relatively tight $3.44/bbl range; the May futures contracts settled Friday at $101.62/bbl for a $2.16/bbl gain. Natural gas futures spent most of the week in higher territory, the May futures contract gained a sizable $.188/mmBtu to close Friday at $4.485/mmBtu. Spot ethane prices recovered a bit, adding a penny finish Friday at $.295/gal ($.124/lb). Spot propane ended the week at $1.06/gal ($.30/lb).
The spot ethylene market saw good activity, but not much of a price change. A couple of crackers returned back online after short unexpected outages, two crackers remain offline for planned turnarounds and capacity expansion. Ethylene for March delivery visibly traded about a dozen times in less than a $.01/lb range. Most of these transactions were at slighter lower prices, but ethylene most recently changed hands at $.52/lb, recouping the quarter-cent lost in the previous week. The forward curve is essentially flat through May and then takes on a backwardated shape, shaving a little each month until nearly a $.02/lb discountis seen for Dec 2014.
The spot polyethylene market was busier and suppliers were seen as the aggressors; the volume of material on offer increased from both producers and resellers. Polyethylene prices slid earlier in the month and most grades were flat this week, although HMWPE did shed a cent. Houston traders have plenty of warehoused inventories and there is packaged material of practically every commodity grade ready to ship. Dow, the lone producer to issue a $.06/lb increase for March, now intends to implement the increase for HDPE as split $.03/lb in each April & May, with the full $.06/lb for LDPE & LLDPE now targeted for May. Sans any additional major production issues, this change should stymie the other producers' efforts to implement their current $.06/lb increase issued for April. However, as we have written, we did not see much of a chance for an April increase anyway.
The spot propylene market was quiet again; there were a few trades done late in the week at familiar levels. Petrologistics' PDH unit was taken offline for maintenance. For the second week in a row, PGP for March delivery most recently transacted a shade under $.69/lb and was subsequently offered below the last done deal. The PGP forward curve flattened a little more, the market is stable for the next few months and then the discounts kick in, but now only to the extent of $.02/lb by year end. March PGP contracts were down $.015/lb to $.72/lb. A nomination was issued to keep the same price for April, although a modest decrease could also be justified. There were several RGP transactions in the low $.60s/lb.
Spot polypropylene availability swelled to the highest level in recent memory. A typical flow of widespec railcars were seen, coupled with generic prime cars from resellers that still required disposition prior to month end. Demand remains sluggish, so it seems that some domestic suppliers will reluctantly take some extra resin into inventory. Houston traders are already flush with material from when the market failed to follow through with the early 2014 rally. Processors, disappointed by the March $.015/lb decrease and frustrated by relatively high prices, seem to be keeping contract purchases to a minimum. While April contracts will at most see just a small decrease, we think PP demand might still begin to improve. After the past 2-3 months of below average purchases, domestic buyers will need to come back to replenish some of their dwindling resin stocks - at least in a limited way.
Final thought from The Plastics Exchange CEO Michael Greenberg:
"We were pleased to see an uptick in resin trading activity to help salvage an otherwise slow month in March. There were good spot opportunities this past week as sellers were willing to deal on price to get the order. Overall spot prices had already softened, taking on a discount to contracts and mostly held steady this past week. April could begin with a firmer tone as is typical to start a month, but we do not anticipate strength to be maintained. The exports markets are still challenging based on Houston asking prices tied to replacement costs, a decrease in producer offering prices will likely be needed to re-open the arbitrage and enable high volume incremental sales. Otherwise, burdensome inventories could likely develop and pressure the domestic market as well."