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January resin prices: PE down $.04/lb and PP declined $.10/lb

The spot resin markets found renewed interest into month-end and an above average volume of material, particularly PE, changed hands to finish off the month of January, according to The Plastics Exchange. Commodity resin prices were mixed; polyethylene was steady to mostly lower amid heavy offerings, while polypropylene stabilized and then managed a small gain at the end of the week.

. Commodity resin prices were mixed; polyethylene was steady to mostly lower amid heavy offerings, while polypropylene stabilized and then managed a small gain at the end of the week. While there could be some variance amongst participants, average PE contracts were down $.04/lb in January and PP contracts generally declined $.10/lb. Houston prices have been chasing export bids lower, with extra large concessions made to move swathes of material offshore.

The major energy markets were mixed in volatile trading, with ranges of more than 10% in each product. March WTI Crude Oil made new contract lows at $43.58/bbl, before jumping almost $4/bbl on Friday, ending the week at $48.24/ bbl. It was a net gain of $2.65/bbl. March Brent Oil futures also saw see-saw action, ultimately recording a net gain of $4.20/bbl to $52.99/bbl. Natural Gas went the other way, sliding 9%, $.267/mmBtu, to settle Friday at $2.637/mmBtu, the lowest since the summer of 2012. Spot ethane eased about $.005/gal to $.18/gal ($.076/lb). Spot propane slid a cent to $.50/gal ($.142/lb).

The spot ethylene market was fairly active, with numerous deals done for both prompt and future delivery. A number of planned and unexpected outages have crackers collectively operating at significantly reduced rates. Still, January ethylene spent the entire week in negative territory, last trading at $.35/lb, which was almost a 2-cent loss. February ethylene also transacted Friday at the same level. Ethylene in Louisiana is carrying a $.10/lb premium due to supply constraints as the Evangeline Pipeline remains closed. The ethylene forward curve is flat for the next eight months, but then falls off about a penny by the end of 2015.

Spot polyethylene trading was good; offerings were abundant and material continued to accumulate. Most grades are readily available and competition for orders is pressuring the market. Asking prices dropped widely to better match the lower levels initially established by early movers. The market seems to be catching up, at least for the moment - there are currently only slight discounts provided for Prime packaged resin another two weeks out. January PE contracts were mostly down $.04/lb, bringing the three month tally to $.11/lb. We foresee additional downside to domestic prices / contracts in February, as spot prime offers remain well discounted to contract levels and good quality offgrade is even cheaper.

The propylene market was only moderately active. PGP for January delivery changed hands just a few times and mostly around $.47/lb, which was down a cent. The market then firmed a bit and was indicated back around $.48/lb by week's end. Spot prices have stemmed their slide and a nomination to increase Feb PGP contracts $.015/lb to $.51/lb was issued. Indeed, current spot levels support a steady to small uptick in contracts. The forward curve remains backwardated, with slightly lower prices quoted each month until a discount around $.02/lb is seen by December. RGP for February delivery firmed a few cents to around $.39/lb.

Polypropylene trading activity was good, but completed transactions fell short, as supply is just spotty and buyers' price expectations are often not realistic. Over the past three months, PP contracts followed PGP monomer lower, and on average decreased $.25/lb, with about $.10/lb coming out in January. We have noted during this period that PP supplies have been tight as producers try to match production to forecasted orders. Considering a few reactor issues, supply/ demand is well balanced and certain PP grades are outright difficult to source. Given the dynamic, producers have been able to make headway in their attempt to disengage the absolute correlation between PGP and PP. To further this margin expansion effort, resin producers have issued additional increases, as much as $.05/lb, beyond the change in PGP contracts during February and March.

Final thought from The Plastics Exchange CEO Michael Greenberg:

The resin markets were very interesting during January. Polyethylene contracts dropped $.04/lb, while spot saw a steeper break of $.06-.09/lb. The deviation between spot and contract is even more pronounced when viewed over the past three months and paves the way for an additional contract decrease in February. Polypropylene, both spot and contracts, dropped about a dime in January. However, moderate contract price increases emerged for Feb/March and spot PP prices firmed a half-cent on the last day of January, it was the first uptick since October 1. With so many fundamentals to watch including: volatile energy and feedstock costs, resin production, domestic demand, inventory levels throughout the supply chain, international resin prices, exports and expectations for future pricing, the new month ahead should also be at least equally exciting! 

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