TPE resin prices, August 15-19: PE flat/lower; PP down $0.005/lb; August contracts look to finish steadyTPE resin prices, August 15-19: PE flat/lower; PP down $0.005/lb; August contracts look to finish steady

Spot resin trading activity jumped last week as availability improved and prices slipped , partially sliding in response to weakening international markets. After two months of declines, spot polymer markets started August on an uptick and it appeared that resin producers would be able to implement contract price increases. However, spot-trading platform The Plastics Exchange (TPE) noted that sharply lower energy markets and worldwide economic uncertainty have effectively stifled those increases. "It now seems that contract prices for both PE and PP will remain flat for the month and producers will give them another shot in September," Michael Greenberg, TPE CEO said.

TPE resin prices, August 19, 2011

Energy markets were weaker, as October rolled to the front month futures contract. Crude oil prices started out higher but gave back the gains and then some, with the October contract ending the week at $82.41/bbl, for a loss of $3.28/bbl. Natural gas prices resumed their downtrend, erasing the previous week's gain. The October contract settled at $3.941/mmBtu, down $0.13/mmBtu, leaving the crude oil : natural gas price ratio just below 21:1.

Ethylene's spot market was active again, although price movement was limited. Ethylene crackers are operating near full capacity, but there is scheduled maintenance ahead. Ethylene traded several times throughout the week with the final transaction for August delivery at $0.615/lb, the same as the previous Friday. The net transaction price (NTP) has not been determined for August; the NTP for June and July was $0.5675/lb.

Polyethylene (PE) spot trading improved while prices were steady to lower. After back-to-back decreases in June/July, it seemed that PE producers might finally have luck implementing their $0.05/lb price increase on the fourth attempt. However, current demand is proving too soft, perhaps because buyers bought into the notion of the increase and purchased almost 150 million lb more resin in July than the previous two-month average. While export demand was also stronger in July, posting its best results since March, it has wavered in August amid falling energy and international resin prices. "Maybe the fifth time will do the trick in September," Greenberg said, "or they should just try for a smaller increase, like $0.03/lb."

Propylene spot trading was mild and there were just a few deals seen done. Refinery grade propylene (RGP) for August delivery traded a couple times at $0.68/lb, steady from the previous week. While another week has gone without a spot polymer-grade propylene (PGP) trade, the market has become a bit softer. PGP for August delivery was offered down to $0.78/lb, just below the level of the previous transaction and the same price as August PGP contracts.

Polypropylene (PP) spot prices eased $0.005/lb, with good fresh railcar availability and participation from Houston traders. Offerings from domestic resellers, however was "spotty," according to TPE. Demand in August seems to be a little slower than in July when buyers purchased 175 million lb more than the previous two-month average. Processors feared a bounce in August PP contracts, but that faded along with lower energy prices and easing feedstock costs. The generic prime market, which recovered nicely in the beginning of the summer, feels rather directionless at the moment, but a couple more cents could still come out of the offgrade market, according to TPE.

Final thought from Michael Greenberg

Spot resin trading was fairly swift this past week, but still somewhat tempered by the lack of price movement. Most orders from processors were to fill in production needs, rather than adding to inventories. Contract prices for both polyethylene and polypropylene will settle steady in August as PE buyers resisted yet another attempt to implement the nickel increase and PGP monomer costs rolled over from July. The markets will likely remain relatively stable until something new comes along to provide direction, but there is potential to the upside, considering that the season's first hurricane could make landfall in the coming days, but away from the gulf.