TPE North American resin pricing, August 23-27: PE and PP up; September contract increases put forwardTPE North American resin pricing, August 23-27: PE and PP up; September contract increases put forward
Market overview: The spot resin markets were relatively slow for the second week in a row, in stark contrast to the frenetic trading seen in first half of August. Spot-trading platform The Plastics Exchange (TPE) noted that there was a steady stream of demand, but added that spot supplies have been drying up ahead of contract price increases, which are slated to take effect for September.
August 31, 2010
Market overview: The spot resin markets were relatively slow for the second week in a row, in stark contrast to the frenetic trading seen in first half of August. Spot-trading platform The Plastics Exchange (TPE) noted that there was a steady stream of demand, but added that spot supplies have been drying up ahead of contract price increases, which are slated to take effect for September.
Polyethylene (PE) was $0.01-$0.02/lb higher, while polypropylene (PP) continued its recent climb, adding another penny. Spot monomers rallied sharply amid new production issues, and Houston's resin export market was quiet with lower international prices preventing large-volume spot trades.
"The spot resin markets found renewed strength this past week with September and fresh price increases imminently around the corner," Greenberg said. "If the spot price is right, processors have become willing to add modestly to their inventories, but not much resin has been around."
Energy prices moved in opposite directions, with October crude oil futures snapping back from mid-week lows of $70.76/bbl to finish at $75.17/bbl, ultimately gaining $1.35/bbl on the week. Natural gas futures eroded further, shedding $0.432/mmBtu, almost 11% of their value, to finish at $3.705/mmBtu. That price is the lowest seen since September 2009. The crude oil : natural gas price ratio widened dramatically to more than 20:1, which is greater than three times the 6:1 ratio considered parity. This offers even greater cost advantage to ethylene and PE producers that derive their feedstocks from the natural gas chain rather than from crude.
Ethylene spot prices jumped nearly $0.05/lb, rising 13% in active trading. TPE notes that two new ethylene production disruptions drove spot demand and sent September ethylene soaring as high as $0.4125 before it settled back down by a penny on Friday. August ethylene last transacted at $0.4075/lb. While some strength was seen in 4th quarter pricing, the market's backwardation steepened, according to TPE, indicating a near-term supply shortage that is currently anticipated to be resolved before then. Ethylene's net transaction price (NTP) for July and August remains undiscovered.
Polyethylene's (PE) transacted spot volumes were low last week, but not necessarily for a lack of demand, according to TPE. As September closed in, and a new $0.05/lb price increase came into play, suppliers began pulling back their offers, with some returning at higher levels. After several weeks of stability, most spot PE gained about $0.01/lb, while low-density (LDPE) film grades continued their rally, adding another $0.02/lb. TPE noted that high North American LDPE prices have encouraged European traders to offer material into the U.S. Elsewhere, average high-density (HDPE) and linear low-density (LLDPE) commodity resins rose $0.04/lb from the season's lows seen during the last week of July.
Propylene's spot market also "awoke", according to TPE CEO Michael Greenberg, with mixed pricing seen in active trade. August refinery grade propylene (RGP) traded several times on either side of the previous week's final trade of $0.4425/lb. RGP for September delivery started to see action, reaching as high as $0.455/lb. The contango trade indicated a belief that contract chemical grade propylene (CGP) and polymer-grade propylene (PGP) prices will rise in September. A lone spot September PGP transaction was reported this week at $0.575/lb. That was steady to the previous week and also the same price that August PGP contracts had settled at earlier in the month. "September CGP contracts have been initially talked up $0.025/lb," Greenberg said, "although there was no mention of PGP, they typically move in tandem."
Polypropylene (PP) edged another penny higher last week after several weeks of stable prices on the spot market. Spot PP has rallied $0.10/lb from the season's low point in early/mid-June, and while some offgrade railcars are still coming through the spot market, offers have dwindled into month-end. Resellers that have uncommitted warehoused inventory have sometimes held back material waiting to see how September pricing for PGP and PP shakes out. A light volume of generic-prime homopolymer PP has been made available for around $0.70/lb. A level that Greenberg said "seemed like a frighteningly high price to those processors hearing the offers."
Rising monomer prices fanned the market's flames last week, and looking towards the new month, producers have issued their intent to raise September PP prices by $0.04/lb. PE producers, meanwhile, have backed a September price increase initiative of $0.05/lb with an additional $0.04/lb nomination for October.
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