TPE resin prices, June 13-17: PE and PP shed $0.01-$0.03/lb: PP $0.17/lb off its May peak

Spot polyethylene fell again last week, dropping $0.01-$0.03/lb, while polypropylene prices shed another $0.03/lb. The Plastics Exchange (TPE) said the spot resin markets saw another week of heightened trading activity, with a consistent flow of lower priced offers prompting processors to step in and buy. The complete implementation of the $0.05/lb polyethylene price increase is unlikely, but a reduced increase of $0.03/lb for high-density PE is still possible. June polypropylene contracts are falling $0.15/lb along with polymer-grade propylene (PGP) monomer contracts.

TPE resin prices, June 17, 2011

Energy prices were sharply lower and the front month futures contract began to roll. August crude oil futures dropped $6.45/bbl to settle at $93.40/bbl on Friday-the lowest close since January. August natural gas futures plunged $0.429/mmBtu, about 9%, to end the week at $4.36/mmBtu, which was far off the previous week's high of $5.00/mmBtu. The crude oil : natural gas price ratio ended the week at 21.4:1.

Ethylene spot prices fell more than $0.02/lb in fairly active trading, with ethylene for June delivery last trading at $0.6525/lb, essentially wiping away the previous week's gains. A number of ethylene transactions were also seen for July delivery, and those prices were generally a penny below June. Operating rates were reduced by those crackers shut for maintenance but are still running at nearly 95% of capacity. The net transaction price (NTP) for May ethylene was $0.585/lb. There have been no indications yet as to the NTP for June.

Polyethylene (PE) spot prices were softer again last week, with prices falling between $0.01-$0.03/lb depending on the grade. Based on the variety of generic prime railcar offers, it was apparent that producers were looking to whittle down inventories that grew dramatically in May when the market experienced strong production amid weak domestic and export sales. The current imbalance of supply/demand has again created a challenge to implement the current $0.05/lb price increase. The focus now seems to be on a reduced HDPE increase, as those margins and inventories are relatively snug. However, split increases are rarely successful, according to TPE.

Propylene prices remain pressured, and several transactions were seen at or below the previous week's level. The last refinery grade propylene (RGP) trade recorded last week was at $0.70/lb, down another $0.02/lb. Polymer grade propylene (PGP) showed some stability, changing hands at $0.795/lb for both June and July delivery. June PGP contracts are priced at $0.82/lb, which is a $0.15/lb decrease from May.

Polypropylene (PP) shed $0.03/lb for the third week in a row, and the market now sits $0.17/lb below the peak reached in the early part of May. PP supplies are plentiful, according to TPE, and buyers are picking off good deals including generic prime around the price of contract PGP monomer with offgrade opportunities seen below spot monomer. Some processors are already expecting another huge drop in PP prices for July, according to TPE CEO Michael Greenberg, and while the current level of spot PGP for June and July does not support any such move, Greenberg noted, "Hey, it is still just mid-June."

Final thought from Michael Greenberg

Processors of both polyethylene and polypropylene have begun to dip their toes in the water, procuring moderate volumes of spot resin at prices well below month ago levels. Much of the resin currently offered had accumulated at the supplier level during May when buyers foresaw weaker prices and backed away from the market. The export outlet has not provided much support as demand is still diverted by competitive offers shown from other international regions. June PE contracts will likely be steady with a chance of a small bump still possible for HDPE; June PP contracts will confirm down $0.15/lb.