. For the last week of May, better spot availability for certain previously scarce resins, such as LDPE, aided the higher transaction volumes. Spot polypropylene prices shed a half-cent as did most polyethylene grades, sans still snug LLDPE, which again held firm. Producers skated through another month without relieving PE contract prices - there has not been an official decrease since Nov 2012, when $.02/lb came out of the market. PP contracts eased only $.005/lb, returning to levels last seen in Dec 2013. PP exports have been relatively insignificant and incremental PE exports through secondary channels remain challenged. Notwithstanding sporadic production issues, signs of growing upstream resin inventories are beginning to show.
The major US energy markets finally reversed course, but still traded in opposite directions. After a several-week rally, Crude Oil finally gave back a bit of its gains; the July contract peeled off $1.64/bbl to settle Friday at $102.71/ bbl. July Natural Gas futures recovered a solid $.137/mmBtu and rallied to $4.542/mmBtu by week's end. For the second week in a row spot Ethane added a half-cent, closing Friday at $.2925/gal ($.123/lb). After serious volatility, spot Propane prices stabilized somewhat, shedding just $.005/gal to $1.045/gal ($.296/lb). The Crude Oil: Natural Gas ratio contracted to 22.6:1.
Spot ethylene activity picked up and saw slight gains as the month came to a close. A handful of crackers remain offline for their scheduled turnarounds. Ethylene for both May and June delivery transacted quite a number of times and all within a penny range, most recently at $.545/lb, which was the high for the week. The forward curve steepened a bit with a $.02/lb discount afforded by Dec 2014, while ethylene is priced to slide another $.035/lb during the course of calendar year 2015.
Michael Greenberg, CEO of The Plastics Exchange, said that they were pleased to see spot polyethylene trading pick back up into month-end; despite the holiday shortened week, transacted volumes again ran above average. Most polyethylene materials slid $.005/lb and all HDPE grades reverted back to end of April levels, but are still up $.01/lb for 2014. Pent up demand for LDPE film resins, which had been tightly supplied, was met by willing sellers. Additional material remained on offer, which helped to knock LDPE prices off a half-cent, but are still up $.02/lb for the month and year. LLDPE continues to be the strongest of the bunch, holding firm to its $.04/lb gain for the year - it is the only grade whose spot gain equals the $.04/lb contract increase implemented in February.
Spot propylene trading was about average and prices were softer. PGP for May delivery went off the board at $.66/lb, which was $.045/lb below its contract price of $.705/lb. June then took over as the front month and shed another $.005/lb. June RGP slid almost $.04/lb, hanging just above $.54/lb. These wide splitter margins, currently above a dime, could now pave the way for a further decline in PGP prices. Given spot propylene levels, we anticipate June PGP contracts to drop at least $.025/lb, which is more than the cent or so initially discussed. Front end weakness and firm 4Q prices served to flatten the PGP forward curve a little more and there is just a $.01/lb discount currently priced through Dec.
Polypropylene trading remained lackluster; spot prices slid another $.005/lb, which was not enough to attract significant buyer interest. May PP contracts were priced just $.005/lb lower, and since weak spot PGP monomer markets indicated another and larger drop next month, buyers have been holding back orders for June. After a string of disappointing demand, the market could finally be poised for better buying and stronger order volume. Sellers are not necessarily showing all of their offers to secondary channels as it could potentially have a negative impact on the market.
Final thought from Greenberg:
Buyers and sellers came together again to make for an active final week of May. After another contract rollover, some polyethylene buyers seem to be coming to grips that the much sought after price decrease might just not come through. As such, we have seen more processors turning to the spot market to pick off well-priced resin as opportunities arise. A number of large film extruders are also seeking their own non-resin related price increase to cover creeping costs and expand margins. Polypropylene buyers should fare a bit better in June, as their contracts are set to slide a few cents and finally join the spot market into cheaper territory for the year.
