TPE resin prices, March 11-15: PE mixed; PP down $0.01/lb; Lower prices ahead?

Polyethylene film grades held steady while HDPE eased a tad and PP prices shed a penny. Spot resin trading was sluggish again, according to spot-trading platform The Plastics Exchange (TPE), although volumes did increase somewhat from the previous week. Spot availability which had been snug began to improve towards the end of the week. March PP contracts settled early in the month with a $0.06/lb decrease, cleanly reversing the February gain. Depressed spot markets for both polymer grade propylene (PGP) monomer and resin are indicating even lower contract prices ahead. February PE contracts were mixed by producers and product. In general, HDPE was mostly $0.04/lb higher, while LDPE and LLDPE film were either flat or in some cases up $0.04/lb. March PE contracts remain uncertain, but should see some movement even if just to square up from February, according to TPE CEO Michael Greenberg.

TPE resin prices, March 15, 2013

Energy markets rose further. April crude oil futures added $1.50/bbl to end the week at $93.45/bbl. Natural gas saw gains for the fourth week in a row, and the rally intensified. The April futures contract jumped $0.243/mmBtu to settle at $3.872/mmBtu on Friday, the highest level since late November. The crude oil: natural gas ratio contracted further to 24:1.

Ethylene spot prices moved higher in active trading; a high volume of product changed hands for March and April delivery. Prices for the week peaked just shy of $0.66/lb, up about $0.03/lb, but were then marked lower on Friday, still the net gain was more than $0.02/lb. Cracker outages and restarts added to the market's volatility. Although most of the gains were seen in the front months, the rest of the curve was dragged a little higher and the backwardated shape steepened. The discount achieved for July is nearly $0.04/lb and is almost $0.09/lb by December 2013. Spot ethane gained a penny to $0.28/gal ($0.118/lb).

Polyethylene's spot market was steady to lower; both buyers and sellers were distinctly absent from the party during the first half of March, but began to appear as mid-month approached. "Downstream demand seems to be faltering and producers have been playing coy as they try to fully secure the $0.04/lb increase partially implemented in February," Greenberg said. "A sense of confusion remained price-wise and processors, frustrated by the inconsistencies, have withheld orders from some suppliers seeking more competitive offers elsewhere." The market should even out in March, according to TPE, as Generic Prime railcars of most grades are now priced to reflect the current $0.04/lb increase, which would bring the 2013 total to $0.09/lb - but the increase is still not fully secured.

Propylene spot monomer prices continued to slide during most of the week, but perked back up on Friday, erasing the earlier losses. A number of deals were done chiseling the spot PGP price for March delivery down at least a couple cents more to $0.63/lb - a full $0.10/lb below contracts. The market then bottomed out, at least for the moment, and snapped back above $0.65/lb in a series of trades. The market through May is all priced similarly, but then drops off for the rest of the year until it pierces below $0.60/lb for December. Refinery grade propylene (RGP) prices got hit hard, falling $0.06/lb to last trade slightly above $0.56/lb, re-establishing healthy splitter margins.

Polypropylene (PP) market sentiment remains negative and average prices slid another penny. The range of asking prices for available material is very wide - fresh Branded Prime railcars are in the $0.80's, Generic Prime is mostly mid $0.70s/lb, domestic offgrade railcars are offered in the very low $0.70s/lb, and lower grade export material generally is in the $0.60's. Contract orders will likely come up short again, according to TPE, as processers are disappointed with the $0.06/lb discount given for March. With spot PGP monomer transacting at a sharp discount to contracts, resin buyers are limiting PP purchases in favor of an inventory drawdown. Sure, price relief is nice and contracts are back to January levels, but still remain up $0.165/lb for the year. "When contracts go up and then down the same amount in a two-month period, it becomes very difficult for processors to fully to pass the increase downstream to their customers."

Final thought from Michael Greenberg

The first half of March was very slow throughout the industry. Processors, sensing lower prices ahead, are limiting purchases of high priced resin. Those buyers that can handle Generic Prime or offgrade are finding better prices for spot rather than contracts hampering direct orders. Resellers are quietly unloading un- committed material and then generally only seeking back-to-back opportunities. Spot exports are challenged by elevated US prices and weaker international markets. Do note that while resin prices should ease in the second quarter, there are still several major crackers to come offline for planned turnarounds and if a couple unplanned outages occur it could cause a quick upward spike. As downstream inventories are worked off, it potentially creates vulnerability for those without ample resin on hand.