TPE resin prices, March 18-22: PE down $0.01; PP off $0.03/lb; February contracts move in opposite directions

Spot polyethylene prices slid a penny last week, while spot polypropylene prices continued to unravel, sliding another $0.03/lb so that they're now sitting $0.10/lb below their mid-February highs. Spot-trading platform, The Plastics Exchange (TPE) reported that producers secured their $0.04/lb increase split between February and March, with polypropylene contracts settling down $0.06/lb early this month. Elsewhere, HDPE blowmolding and injection grades saw an increase in February, while LDPE and LLDPE film grades took the hike in March. Overall, TPE reported that spot resin trading was better and transacted volumes increased substantially from the quiet first half of March. "There was a heavy flow of offers and prices fell while buyers requiring material also raised their bids, together closing the wide gap to facilitate trades," noted TPE CEO Michael Greenberg.

TPE resin prices, March 22, 2013

Energy markets moved in opposite directions as May rolled to the front month. May crude oil futures eased a modest $0.11/bbl to settle at $93.71/bbl on Friday. Natural gas futures temporarily peeked above $4/mmBtu while recording their fifth straight week of gains. The market receded a bit by week's end, but still settled at $3.952/mmBtu up $0.043/mmBtu. The crude oil : natural gas ratio contracted further to 23.7:1.

Ethylene's spot market was busy again with good activity seen for both near-term delivery and in deferred months through the end of 2013. Prompt prices held firm the first part of the week, trading several times above $0.65/lb, but then sold down to $0.635/lb by Friday. The backwardated shape of the forward curve flattened a tad, and the discount for July ethylene was about $0.03/lb and nearly $0.08/lb by December. The cracker turnaround season continues, and several units are returning back to operation while additional units are slated to go offline. Spot ethane rallied further reaching $0.2875/gal ($0.121/lb).

Polyethylene (PE) saw a divergence between the spot and contract markets last week. The $0.04/lb increase that was only partially implemented in February, and mostly for HDPE, saw industry wide acceptance for LDPE and LLDPE in March. This brings the total 2013 increase to $0.09/lb cleanly across producers and product lines. Despite the confirmation of the March increase, spot demand still languishes and Generic Prime resin, at seemingly sharp prices, is still difficult to move domestically. "The export market is seeing occasional surges in demand," Greenberg said, "but it is not an easy arbitrage sale." At this time, there is a $0.04/lb increase nominated for April contracts.

Propylene's spot market was fairly active and ended in negative territory. Prompt polymer grade propylene (PGP) traded above $0.65/lb early in the week, which was steady to a little higher, but then transacted just below $0.635/lb and was subsequently offered even lower, scoring a net loss of more than $0.02/lb. Future months saw similar declines and PGP for December delivery is now indicated below $0.58/lb. In a relatively rare occurrence on a spot basis PGP monomer is now priced below ethylene; it could go further discount, but it never seems to last very long. Construction of another propane dehydrogenation (PDH) facility has been announced, but physical operations are still a few years out.

Polypropylene (PP) saw another good round of selling, as resin offers came in waves and average prices dropped $0.03/lb. There were instances where sharper discounts were afforded to move offgrade cars; some lower-end material was also blown out to the export market. Despite a $0.06/lb decrease for March, processors continue to limit contract purchases tied to monomer, which would price homopolymer cars in the low $0.80s/lb. "While there are clearly better buying opportunities in spot, some just choose to work off inventories as weak spot PGP points to lower PP contracts in April," Greenberg said, adding that TPE experienced similar trading activity during the second half of February. At that time, much of the surplus cleared and the spot market tightened in early March.

Final thought from Michael Greenberg

It does not happen often, but March PE and PP contracts moved in opposite directions. Polypropylene dropped $0.06/lb, the same it gained in February, leaving contracts up $0.15/lb for the year. To the surprise of some market participants, most PE contracts were up $0.04/lb in March, bringing its 2013 tally to $0.09/lb. There is another $0.04/lb increase on the table for April. Still, market sentiment is weak, buyers think that they have weathered most of the storm and are holding out for the backend relief expected after the cracker turnaround season completes and monomer prices subside.