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Spot prices were relatively stable and traded volumes were good as market participants squared up month-end positions to finish July and prepared for a viable price increase initiative in August. Spot-trading platform, The Plastics Exchange (TPE), noted that polyethylene contracts dropped $0.03-$0.04/lb in July, just as they had done in June. Depending on grade and producer, most contract buyers received a total of $0.06-$0.07/lb of price relief.

PlasticsToday Staff

August 2, 2011

4 Min Read
TPE resin prices, July 25-29: PE and PP fall in June & July but spot prices are on the rise; Is the early summer price

Spot prices were relatively stable and traded volumes were good as market participants squared up month-end positions to finish July and prepared for a viable price increase initiative in August. Spot-trading platform, The Plastics Exchange (TPE), noted that polyethylene contracts dropped $0.03-$0.04/lb in July, just as they had done in June. Depending on grade and producer, most contract buyers received a total of $0.06-$0.07/lb of price relief. July polypropylene contracts slid $0.04/lb along with the change in polymer grade propylene (PGP), for a total drop of $0.19/lb during June/July. While contract PE/PP prices moved lower, spot prices for the active commodity grade resins actually rallied during July, closing much of the large discount that built during the second quarter.TPE_resinprices_2.jpg

TPE resin prics, July 29, 2011

Energy prices moved lower last week, as September crude oil futures backed away from the $100/bbl level, dropping $4.17/bbl to settle at $95.70/bbl on Friday. September natural gas prices continued to erode, shedding another $0.225/mmBtu to end the week at $4.145/mmBtu. The crude oil : natural gas price ratio currently sits at around 23:1, providing what TPE called a "healthy" cost advantage to integrated North American petrochemical producers that primarily derive their feedstocks from the natural gas stream.

Ethylene's spot market continued to power higher posting another week of solid gains, as several crackers were taken offline due to production complications, tightening short-term supplies. Ethylene for July delivery saw its final transaction at $0.6325/lb, up nearly $0.02/lb. Material for August delivery, which had been priced at a slight discount, last traded at $0.635/lb. The spot market is trading well above the last net transaction price (NTP), which was declared at $0.5675/lb for June. TPE expects the NTP for July to rise based on the month's spot-trading activity.

Polyethylene (PE) had another week of consolidation, and although domestic Generic Prime commodity grades saw minimal price movement, the continued strength in the offgrade and international markets essentially "cleaned up" the low-end pricing, according to TPE. Higher spot monomer costs and a more-balanced supply/demand dynamic supported by better exports have started to shift pricing power back in the hands of the producer. After shedding $0.03-$0.04/lb two months in a row, PE contracts are now poised to recover somewhat in August; could the long-proposed contract increase finally stick? "Regarding that pesky $0.05/lb price increase...well, perhaps the 4th time will be a charm," TPE CEO Michael Greenberg noted. Adding to the upward pressure, a fresh $0.06/lb increase has also been nominated for September.

Propylene spot activity increased, but price movement was modest. Refinery grade propylene traded both sides of even money, with the week's final transaction for July delivery seen at $0.69/lb, up a half-cent. PGP for August delivery changed hands at $0.79/lb, just more than a penny above the previous week's level for July delivery. During most of the month, spot PGP was priced at a discount to PGP contracts, but it has now reached a $0.01/lb premium, providing some mild guidance as participants negotiate August PGP contacts.

Polypropylene (PP) spot market had a very rare week of steady pricing after rallying $0.07/lb during July. All the while, PP contracts were actually down $0.04/lb. The $0.11/lb swing has brought spot and contract pricing back in-line, but it also highlights the inherent difference between these markets, and the opportunities that are available from time-to-time. Greenberg: "For the past several years, PP contracts have been pegged to PGP contracts and float monthly with these feedstock costs; on the other hand, the spot market and varying premiums and discounts to contracts, more closely reflect supply/demand (im)balance and the perception of future pricing. With spot and contract prices finally coming back together at the end of July, it is a pretty good indication that August contract prices will see a very small change relative to the extreme moves during the first part of 2011."

Final thought from Michael Greenberg:

Spot resin-price movement was benign this past week, but the market's recovery during July could very well indicate the end to this cycle of price relief. During June and July, PE contracts receded $0.06-.07/lb, while PP contracts caved a whopping $0.19/lb; however, both commodities are still well above levels from the beginning of 2011. Resin producers are looking to build on recent market momentum and implement price increases in August. PE producers are seeking a nickel (again), and while some PP producers would like to eek out a little extra margin, resin contracts will likely just float with PGP, which should be steady to a few cents higher.

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