TPE resin prices, April 23-27: PE steady/lower; PP down $0.02/lb; spot deals abundant as April closes

Spot resin trading remained challenging last week, as the stream of offers continued to flow at a heavy rate and prices were steady to mostly lower. Spot-trading platform The Plastics Exchange (TPE) noted that despite price increase nominations, April resin contracts for both polyethylene (PE) and polypropylene (PP) rolled flat. Overall market sentiment has turned negative and buyers are limiting purchases, targeting deeply discounted offers as needed since they anticipate lower prices ahead, according to Michael Greenberg, TPE CEO. Resellers, especially those caught with relatively high levels of uncommitted inventory, are chasing the bids even as they fall. Resin offers from Asia and the Middle East are hurting export demand, which is currently insufficient to clear the growing overhang of North American supply.

TPE resin pricing, April 27, 2012

Energy markets moved higher in the U.S. last week, with natural gas gains actually outpacing crude oil. This brought the crude oil : natural gas price ratio in from the record level of 54:1 back to 48:1. Even there, it is still eight times the ratio considered parity. June crude oil futures, which moved to the front month, added $1.05/bbl to end the week at $104.93/bbl. June natural gas jumped $0.171/mmBtu, over 8%, to settle at $2.186/mmBtu on Friday.

Ethylene's spot market fell in fairly active trading. The final round of seasonal cracker maintenance began, and about 15% of total capacity is currently offline. Despite this, Greenberg noted that "some light can be seen at the end of the tunnel." Ethylene for both April and May delivery transacted several times during the week at $0.685/lb, down a penny, and then May slipped further on Friday to $0.66/lb. The forward ethylene curve was also pressured and deals were done about $0.02/lb lower for both third quarter (high $0.50s/lb) and the fourth quarter (low-mid $0.50s/lb). Ethane prices were fractionally lower, closing the week at $0.5125/gal ($0.215/lb).

Polyethylene (PE) spot prices were mostly steady to a penny lower with some consolidation seen when market leading discounts were met by competitive offers from other suppliers. Abundant resin availability has pushed buyers away since they expect prices to slide further, according to Greenberg. For those that need to fill in supply gaps TPE has seen "relatively good deals" available for HDPE blowmold and injection, LDPE film and some LLDPE grades. The $0.07/lb price increase nominated for April will be re-attempted by some as a split effort, $0.03/lb for May and $0.04/lb for June - neither of which are likely to be implemented. Offers for material in Houston have fallen sharply as traders look to unwind positions; however, export orders are few and far in-between.

Propylene's spot market exhibited very little activity, and the market remained offered at prices nearly 10% below April contracts, which rolled steady at $0.775/lb. May polymer grade propylene (PGP) contracts have been initially nominated flat, but based on current spot conditions, a decrease is likely to occur. "A nickel or so is reasonable," stated Greenberg. Refinery grade propylene (RGP) changed hands several times, breaking down to $0.625/lb, about 10% below the previous trade, which was almost 2 weeks ago.

Polypropylene (PP) spot prices fell $0.02/lb for the second week in a row. Resellers with excess inventories have dropped prices as they seek orders, with prime PP homopolymer packaged in Houston and good offgrade railcars for domestic delivery available at what TPE calls a very modest premium to spot monomer. The PP market is challenged by inconsistent domestic demand as volatile PGP monomer costs have created wild swings in resin purchasing while processors build and draw down inventories based on expectations of future resin prices. "After enduring $0.215/lb of first quarter price increases, followed by a steady transitional month in April, wide expectations are that next a down-leg of the cycle will ensue," Greenberg said.

Final thought from Michael Greenberg

Spot commodity grade resin was available in abundance as April drew to a close, there were some super-sharp spot specials offered that were not necessarily indicative of general market pricing. Processors withstood price-increase nominations early in the month, breathed a sigh of relief as contracts rolled flat and have since gained confidence as the market appears poised for a fall. May might begin with a typical firm undertone as there is a price increase on the table and special end of the month prices disappear, but it will likely be short lived and at some point, producers might just try to maintain a steady market.