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Polyethylene fell $0.01-$.3/lb, depending on grade, and polypropylene shed another $0.02/lb last week, as spot resin offers were heavy and prices continued with the second quarter coming to a close, according to spot-trading platform, The Plastics Exchange (TPE). Commodity resin contracts dropped in June, as PE fell $0.02-$0.04/lb, and some buyers pushed for a larger decrease.

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TPE resin prices, June 27-July 1: PE down $0.01-$0.03/lb; PP off $0.02/lb; commodity resin prices continue slide

Polyethylene fell $0.01-$.3/lb, depending on grade, and polypropylene shed another $0.02/lb last week, as spot resin offers were heavy and prices continued with the second quarter coming to a close, according to spot-trading platform, The Plastics Exchange (TPE). Commodity resin contracts dropped in June, as PE fell $0.02-$0.04/lb, and some buyers pushed for a larger decrease. Polypropylene contracts plummeted $0.15/lb commensurate with the change in June polymer grade propylene (PGP) contracts.TPEresinprices_0.jpg

TPE resin prices, July 1, 2011

Energy prices rebounded ahead of the long holiday weekend, with August crude oil futures rising $3.78/bbl to finish at $94.94/bbl last Friday. After several weeks of lower prices, August natural gas futures bounced back a modest $0.061/mmBtu to end the week at $4.311/mmBtu. The crude oil : natural gas price ratio moved back out past 22:1.

Ethylene spot prices sustained further losses in light trading, as all Gulf crackers have returned to production. Ethylene for July delivery shed another $0.025lb, coming back to $0.55/lb. The forward curve has flattened with similar prices seen throughout the balance of 2011. The net transaction price (NTP) for ethylene in June fell, initially declared at $0.5675/lb, down a full $0.0175/lb from May.

Polyethylene's (PE) spot market continued to decline with a full slate of material readily available. Sizable losses of $0.03/lb were seen in TPE's benchmark high-density PE blowmolding grade, as well as its low-density PE film, which has been unwinding its large premium to other PE resins. The balance of commodity PE grades fell $0.01-$0.02/lb. Buyers resisted a second attempt at the $0.05/lb price increase and actually received a decrease, generally ranging between $0.02- $0.04/lb depending on grade and producer. Some buyers might have seen as much as $0.06/lb come out of the market. PE producers will reinitiate their attempt to increase resin contracts by $0.05/lb in July. Fairly large volumes of material were seemingly purged into the spot and export markets in late June, according to TPE, however, buyers believe pricing power remains in their hands and are calling for even lower contract prices. Continued weakness in ethylene prices supports buyers' claims, but there is plenty of time left in July to settle the matter.

Propylene's spot market remained under pressure, and prices were steady to lower in limited trading. Refinery grade propylene (RGP) for July delivery transacted at $0.68/lb, the same as the previous week. Spot polymer grade propylene (PGP) continued to fall, changing hands at $0.74/lb, $0.035/lb cheaper than the last trade. An initial nomination of $0.80/lb has been suggested for July PGP contracts, but this $0.02/lb decrease is seen as too light given the condition of the spot market and recent transactions in both RGP and PGP.

Polypropylene (PP) spot prices shed another $0.02/lb as suppliers chased those few spot opportunities available to move their material. Weak contract orders relative to those forecast in May and June caused upstream resin inventories to swell, and the subsequent production cuts have impacted the monomer market, contributing to the current break. After taking a massive $0.365/lb of contract price increases during the first part of 2011, processors are happy to see prices plummet and are buying minimal quantities of resin along the way. PP buyers were pleased to see $0.15/lb out of the contract market in June, with the belief there is more room to the downside in July. This notion is based on the large discount that spot PP holds to contracts and current spot monomer costs. An initial nomination to decrease PGP (and subsequently PP) contracts by only $0.02/lb in July appears too modest, and a larger decrease will likely be seen. Recent spot PP prices are nearly back to where they began 2011, while contract prices in June were still up $0.215/lb for the year.

Final thought from Michael Greenberg

After 5 months of sharply higher resin prices, buyers finally found relief in June with rare decreases seen in both polyethylene and polypropylene contracts. Although resin producers would like to quickly regain pricing power, further weakness could be sustained during July. This is considering that upstream resin inventories are relatively high, the easy export arbitrage is closed, and spot monomer markets are pressured. Of course the month is just beginning and a lot could happen along the way, but for now, the market is still indicated lower.

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