TPE resin prices, July 9-13: PE up $0.01/lb; PP flat; Low prices in June spur huge jumps in consumption, exports

Polyethylene continued its recent rise, adding another penny, while polypropylene prices were mostly steady and carried a tone of uncertainty. Spot-trading platform, The Plastics Exchange (TPE), said that spot resin markets were steady to higher last week while material offers remained light. PE's uptick pushed current prices $0.03/lb above those near the end of June. July PP contracts have already settled flat along with polymer grade propylene (PGP). Some market participants are still talking about a small follow-through decline in PE contracts, TPE CEO Michael Greenberg noted, but given the strength of the spot market, Greenberg said, "steady would make more sense." Producers have nominated a $0.05/lb increase for August PE contracts. PE export sales were stronger in June than expected, and material is still moving offshore swiftly in July.

TPE resin prices, July 13, 2012

Energy markets resumed their recovery rally, with September contracts rolling to the front month. Crude oil futures ended the week at $87.50/bbl, with a gain of $2.67/bbl. September natural gas rose $0.083/mmBtu to settle at $2.869/mmBtu. The crude oil : natural gas price ratio was essentially steady at 30.5:1.

Ethylene spot prices surged, even as the rest of the crackers returned online after completing their maintenance. The market was quiet for much of the week, but it got going in Wednesday trading, rising a couple cents from last week's close, which was a shade below $0.43/lb. The market then continued higher reaching $0.49/lb by the end of the week, gaining more than a $0.06/lb - almost 15%. Deferred months through the end of 2012 were also quoted higher, but the bulk of the gains was seen in the nearby months. Ethane prices also jumped to end the week at $0.33/gal ($0.14/lb).

Polyethylene (PE) spot prices ticked another penny higher amid limited fresh material offerings, better exports, and rising feedstock costs. The spot PE market has recovered about $0.03/lb in the past few weeks, recouping much of the discount that developed towards the end of the second quarter. Market sentiment seems to be shifting more bullish, with market participants now talking more about the $0.05/lb increase nominated for August, rather than the possibility of follow-through weakness for July contracts after the $0.14/lb break during May/June. Preliminary reports indicate that PE exports, which were noticeably stronger in the latter part of June, actually reached 700 million lb, about 150 million lb more than the monthly average during 2012. Back-to-back $0.07/lb contract decreases also spurred strong domestic demand in June estimated at 2.73 billion lb; the highest level in nearly two years. This better demand contributed to a huge inventory drawdown during May/June when some 550 million lb exited producers' stocks - reversing spot supplies from plentiful to tight, according to Greenberg.

Propylene's spot market recovered half of the previous week's steep losses, which were reportedly triggered by traders and on low volume. By the end of the week, PGP for July delivery changed hands at $0.485/lb, $0.035/lb higher than where it was offered the previous Friday and had traded on Monday. The forward curve has returned to a more normal contango formation, where the back months are priced higher than the nearby months. Refinery grade propylene (RGP) continued to transact at $0.37/lb, essentially the same level for the past several weeks.

Polypropylene (PP) prices were mostly steady, and offers markedly lighter as inventories from traders up through producers have dwindled. "The PP market in 2012 has been best characterized by wild swings in purchasing behavior as processors draw and rebuild their resin stocks based on volatile monomer and resin prices," Greenberg said. The $0.255/lb decrease in contracts during May/June generated banner domestic demand of 1.47 billion lb in June, the best in 14 months. This helped producers purge nearly 250 million lb of inventory, the largest single month draw since the end of 2008. PP inventories have clearly shifted downstream, so both spot resin availability and demand have been reduced. Although spot monomer just rallied, it is still priced under contracts and all gulf crackers are finally back operational. PP contracts are holding steady in July, and the market is still seeking direction going forward, but a negative bias is still in the air.

Final thought from Michael Greenberg

It was a light to average week of spot resin trading. Offers continued to flow at a reduced level as inventories in June shifted dramatically downstream into the hands of processors. Consequently spot demand has also been reduced as buyers are already well positioned with material. The heavy cracker turnaround season has finally come to an end, so barring unplanned outages, monomer supplies should be ample going forward. This could keep a lid on the resin market, despite current spot market conditions which are considered tight. However, Polyethylene exports have picked up and could again become a swing factor in the market.