Robust spot resin trading generates above-average transaction volumes

Spot resin trading was solid the week of May 4, 2015, writes the Plastics Exchange (Chicago) in its weekly market report. There was a good flow of both bids and offers generating an above average volume of transactions. Spot polyethylene (PE) prices were mostly higher, with the best gains seen in film grades. Spot PE supplies continued to thin out, but plenty was accessible if one was willing to simply pay the $0.05/lb increase slated for May. Spot polypropylene (PP) availability has been improving, but prices are holding steady, halting a several-week slide that erased a nickel. Although Houston PE prices have steadily risen, export demand remains healthy although it is still hampered by logistics limitations.

The major US energy markets were higher. WTI crude oil had a hefty $4.44/bbl range and reached above $62/bbl mid-week for the first time in 5 months. The June futures contract then eased to end the week at $59.39/bbl, for a small $0.24/bbl net gain. June Brent oil gave back most of the previous week's addition, settling Friday at $65.39/bbl, down $1.07/bbl. June natural gas pressed higher again, adding just more than a dime to close Friday at $2.88/mmBtu. Spot ethane recovered more, jumping $0.0015/gal to $0.1975/gal ($0.083/lb). Propane ceded a whole nickel, retracing back down to $0.4925/gal ($0.139/lb).

Ethylene trading picked up dramatically, with a high volume of material changing hands for both prompt and deferred delivery. Most Gulf crackers are now back online and fully operational. Ethylene for May delivery transacted heavily on both sides of $0.36/lb and most recently smack on, it was fractionally lower for the week. The forward curve remains essentially flat; ethylene for delivery any time over the next 18 months is currently priced within a penny of prompt levels.

PE trading was swift: railcar offers were made available, but reflected the full nickel price increase nominated for May. Processors were actively snapping up well-priced offers from traders and resellers with older inventory. As offers were cleared, resellers generally raised their asking prices for their other lots. Spot PE prices have been strong, and after eliminating the discount previously held to contracts, have begun working into the price increase. PE contracts dropped $0.16/lb from November to February, then held steady in March and April. While it is still too early to gauge how much of the current $0.05/lb increase will stick, at least $0.02 to 0.03/lb can reasonably take hold.

The PP market also saw heightened activity as prices rose. PGP for May delivery ticked higher along a series of transactions, making its way up to $0.40/lb. While the week's gain was just less than a penny and PGP is only $0.015/lb off this cycle low (and six year lows), reaching the psychological level is fairly significant at this time. PGP contracts had fallen a massive $0.335/lb since October, with just a scant penny pop along the way. May PGP contracts were nominated to decrease a half-cent to $0.425/lb, and it seemed that once again even a larger decrease was poised to come through; the market firming the past couple weeks, however, will now likely serve to stem this slide. PGP deliveries over the next few months are all priced around $0.40/lb and will then ease softly into December. The market, however, takes on a steep contango in 2016, with prices posting as high as $0.53/lb by the end of next year. RGP saw few trades and changed hands in the low $0.30s/lb.

PP trading was sporadic. Previously delayed railcars seem to be shipping and spot liquidity has been improving. Those processors caught without specifically required material will still pay a pretty penny for spot supply, but otherwise commodity grades have dropped at least $0.05/lb during the past several weeks. The imbalanced supply/demand dynamic over the past six months has helped PP producers expand margins by lowering contract prices, but by something less than the drop in PGP monomer costs. While there are certainly unique cases, margins have expanded by about $0.04 to 0.05/lb; additional reactors are scheduled for upcoming maintenance and producers are also seeking more margin gains.

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