TPE resin prices, March 19-23; PE slips $0.01/lb, PP falls $0.04/lb

Spot resin prices were lower last week amidst very good trading activity, according to spot-trading platform, The Plastics Exchange (TPE). March polypropylene (PP) contracts were up $0.05/lb bringing the 2-month total to $0.215/lb, with the price hikes described as being strictly cost-push while demand has wavered. After securing half the $0.06/lb price increase in February, polyethylene (PE) producers have mostly sought to implement the balance of the increase in March. National resellers, and Houston-based traders dealing with a challenging export market, have ample inventory and continue to provide good liquidity to satisfy processors' spot needs, according to TPE.

TPE Resin Prices, March 23, 2012

Energy markets moved moderately lower, as May crude oil futures eased $0.77/bbl to finish the week at $106.81/bbl. May natural gas futures dropped $0.063/mmBtu to settle at $2.324/mmBtu on Friday. The crude oil : natural gas price ratio moved out to 45:1, which is near the record-wide level.

Ethylene's spot market resumed its rally, more than making up the penny lost in the previous week. Although the cracker turnaround season is running fairly smoothly and a major unit returned back on-stream last week, a weather related disruption jarred the already supply-constrained market, according to TPE. There were no spot deals seen for March delivery, but ethylene traded actively for April and the deferred months. April ethylene last changed hands at $0.6875/lb - about a $0.03/lb weekly gain. The price for ethylene delivered in the 2nd quarter was buoyed close to the spot price while 3rd quarter material was discounted about $0.07/lb, and fourth quarter ethylene was priced down into the mid $0.50s/lb. Ethane prices plunged towards the mid-$0.40s/gallon, but recovered to $0.51/gallon ($0.215/lb) by Friday, still a weekly $0.03/gallon loss.

Polyethylene (PE) spot prices started the month on an up-tick, but eased a penny for the second week in a row. There is good availability of PE warehoused in Houston, and prices there are softening as the month wears on. Having already garnered a $0.03/lb increase in February, producers looked to build on the market's momentum and at least round out the balance of the pending $0.06/lb increase. Some had even expressed aspirations for an additional $0.07/lb early in the month, but that quickly fell by the wayside. Processors have resisted the March increase, opting to pull down inventory when possible and limit contract orders. Growing volumes of generic prime railcars have been seen in the market, clouding the chances to lock in the $0.03/lb. "Still, as we enter the last week of March," noted TPE CEO Michael Greenberg, "the increase remains on the table and implementation is certainly possible."

Propylene monomer traded several times last week, with polymer grade propylene at $0.74/lb, steady from the week before. The market was then offered a quarter-cent lower on Friday, the same price where PGP is currently indicated for April. March PGP contracts settled early in the month up a nickel at $0.775/lb and have consistently traded below that level. March PGP is $0.02/lb lower than it began the month. This all bodes well for those on the buy-side. After a steep 2-month increase, it looks like April PGP contracts should ease a little. Refinery grade propylene (RGP) traded at and just below $0.68/lb, marginally higher for the week.

Polypropylene (PP) finally buckled under the pressure of near-term over-supply, slicing off $0.04/lb in a large weekly loss. Back-to-back monthly price increases totaling $0.215/lb served to shut off contract demand in March, backing up resin which is now weighing on the market. Spot PGP monomer prices have consistently traded below contracts during March, indicating to buyers that the top of this market could already be in place. Most PP contracts are tied to monomer plus a conversion premium, pricing branded prime PP Homopolymer resin in the mid-high $0.80s/lb. The spot market never got much above the low $0.80s/lb with plenty of material available both in railcars and packaged truckloads which soaked up purchase orders. International PP prices are generally below those in the US, limiting the export channels to balance off excess supplies.

Final thought from Michael Greenberg

Commodity resin prices fell for the second week in a row; PE buyers have backed away from the market in an act of resistance, while some PP buyers simply stopped ordering resin with contract prices nearing $0.90/lb. PP producers lowered spot offers considerably to move material, with some railcar prices seen back down in the mid $0.70s/lb - near the price of spot monomer. Resellers, remembering several past cycles, are also looking to liquidate un-committed PP. The PE market is a bit firmer, with the $0.03/lb still up in the air. However, plenty of PE is also  trading just above spot monomer, but that is due to climbing ethylene prices. The resin markets are always interesting and should provide good topics of conversation as the industry converges on Orlando the first week of April. When you are there, stop by to see us at booth 23013.