TPE resin prices April 2-6: PE, PP flat; April contract increases proposed

"While resin processors were generally aggravated by the current high price level of  commodity grade resins, overall spirits were high and a sense of optimism was in the air." That was the viewpoint of Michael Greenberg, CEO of spot-trading platform, The Plastics Exchange (TPE), whose company exhibited last week at NPE2012. TPE reported that the spot resin markets were very quiet last week as the industry gathered in Orlando, adding that although the sheer number of people attending NPE seemed below the previous five shows his company has exhibited at, "People were there to do business." Speaking of business, as the market entered April, polyethylene contracts added a total of $0.06/lb, $0.03/lb each if February and March. Polypropylene buyers saw their contract prices run up $0.215/lb over the same 2-month period.

TPE resin prices, April 6, 2012

Energy markets were mixed in less-volatile trading, as May crude oil futures edged just $0.29/bbl higher to end the week at $103.31/bbl. May natural gas futures continued to erode, shedding another $0.037/mmBtu to settle at $2.089/mmBtu, a fresh 10-year low. The crude oil : natural gas price ratio ran out to a new record of 49.5:1, which presents a tremendous cost advantage to integrated North American PE producers who derive the vast majority of their feedstocks from the natural gas chain, while their international counterparts source most of their feedstocks from more expensive crude oil.

Ethylene managed to hold onto its gains and trade a couple more times around the $0.75/lb level, after soaring $0.06/lb during the last week of March. The spot market had been roiled by an unexpected outage further constraining monomer supplies. Activity, however, was limited as most market participants were attending either NPRA or NPE. The front end of the curve continued to outpace the deferred months, as traders anticipate ethylene will ease after cracker maintenance season concludes in May. Third quarter ethylene was indicated in the mid $0.60s/lb, and material for delivery in the 4th quarter was priced in the high $0.50s/lb. Ethane ended the week a shade below $0.48/gal ($0.20/lb), providing for phenomenal margins in ethylene production.

Polyethylene's (PE) market was quiet and prices unchanged last week, with those who attended NPE returning to a $0.07/lb increase slated for April. At least one producer already delayed their intent until May, according to Greenberg, and others noting $0.75/lb spot ethylene were not so quick to dismiss it. National resellers and Houston exporters are well supplied with older, well-priced inventory and continue to provide liquidity to buyers in need. Offers for LDPE and LLDPE film grades are enticing, while HDPE blowmolding and injection grades are relatively expensive. Incremental high-volume export orders, choked off by rising U.S. prices, are hard to come by, although a normal flow of material is still selling to Latin America.

Propylene saw relatively little activity to begin the month, with a lone polymer grade propylene (PGP) deal for April delivery completed at $0.785/lb, a penny above the March contract price. Spot PGP spent most of March trading at a $0.03-$0.04/lb discount to contracts amid trader selling and slack PP demand, but the market firmed at the end of the month, as PGP contracts for April were nominated to increase $0.02-$0.05/lb. Propylene for the near term is priced at a premium to the back-end of the 2012 curve with the fourth quarter seen around a nickel discount. Refinery grade propylene (RGP) changed hands once at $0.725/lb.

Polypropylene (PP) spot prices were steady last week, and the market was unable to keep up with the rise in contract prices, which sprinted ahead $0.215/lb during February and March. April PP contracts will move with the PGP monomer settlement, currently nominated to increase another $0.02-$0.05/lb. While the contract PP market is directly tied to monomer, spot PP is more indicative of current supply/demand. PP producers are challenged to run their reactors at least in the mid-80s% to consistently produce prime material, but have had a hard time moving all the resin in the mid-high $0.80s/lb, which might be considered a fair premium to PGP monomer. "PP resin plants are not necessarily in the position to simply sell off their excess monomer," Greenberg said, "and the PP export market cannot absorb the surplus volume at the price, so consequently, spot PP has been plenty available in the domestic market and has generally been priced just on either side of spot monomer."

Final thought from Michael Greenberg

The resin markets have been pushed higher by restricted monomer supplies and rising costs, which are challenging domestic resin processors trying to rebuild their businesses during this shaky economic recovery. While price increases are again nominated for April, contract prices should ultimately be fairly stable this month. Inconsistent processor demand coupled with difficult export markets have provided the spot market with a good flow of material. Processors working down heavily inventories built ahead of the 1st quarter price increases are hoping for price relief in May/June and will likely tap the spot market to fill in supply gaps that might develop - especially if producers push for the April increases. Resellers still dealing with older inventory will be happy to sell into this anticipated uptick in spot demand, as most have expressed the desire to be light by the end of May.