TPE resin prices, May 23-27: PE down; PP steady; May contract price increases carried over to June

Spot resin trading picked up as the month drew to a close, with offers fairly heavy in the first part of the week, but petering out ahead of the long holiday weekend. Spot-trading platform, The Plastics Exchange (TPE), noted that resin prices were mostly steady to lower and have come off significantly from the historic highs seen earlier in May. Polyethylene's $0.05/lb price increase was never fully implemented and will be attempted again in June. May polypropylene (PP) contracts did rise $0.095/lb, along with polymer-grade propylene, but expectations are for June PP contracts to fall sharply.

TPE resin prices, May 72, 2011

Energy prices rose last week, as July crude oil futures added $0.59/bbl to end the week at $100.59/bbl. July natural gas futures jumped $0.228/mmBtu to finish at $4.518/mmBtu, and the crude oil : natural gas price ratio contracted further to 22.8:1.

Ethylene spot prices were slightly higher in limited trading, with ethylene for May delivery most recently transacted at $0.69/lb, up a penny from the week before. Material for June delivery traded several times around $0.655/lb. There were crackers that returned back on-stream, as well as a couple that just went down last week, with the net effect being a small reduction in available cracking capacity. With about 8% of total production offline, there is a premium for near-term delivery that eases throughout the summer, eventually priced to the lower $0.60s/lb by August.

Polyethylene (PE) spot availability was good, with prices under pressure. The market has now given back more than the gains garnered in anticipation of a successful $0.05/lb increase in May. Low-density polyethylene (LDPE) film been the weakest of the commodity grades recently, shedding some of the huge premiums developed during 2010. After implementing a total of $0.11/lb in increases thus far in 2011, producers pushed for another nickel but came up short, although not all producers have conceded at this point. Processor demand was particularly strong in March and April, as buyers built some extra inventory ahead of a series of increase nominations. Buyers en large were able to resist the May increase, but producers will have another go at it in June.

Propylene continued to unwind some of the massive gains achieved over the past few months. Refinery grade propylene (RGP) fell to $0.77/lb in active trading, down $0.06/lb from week-ago levels. Polymer-grade propylene (PGP) once again did not transact in the spot market but was indicated down into the mid-$0.80s/lb. A nomination for a $0.07/lb decrease to $0.90/lb for June PGP contracts was offered by a monomer manufacturer. The decrease seems light given the $0.095/lb increase in May contracts and the negative state of the spot market ever since that agreement was reached.

Polypropylene (PP) spot prices were steady and ended the week $0.08/lb below May's peak. The spot market lagged contract prices during the past couple months and did not come close to the $1.10/lb level seen for some direct PP contracts in June. PGP and PP contracts settled in early May up $0.095/lb, but the spot monomer market quickly softened, which then led to cheaper PP offers and reduced resin orders compared to those forecasted. Spot generic-prime opportunities then emerged in the mid $0.90s/lb and are now in the lower $0.90s/lb. The widespec market has offers shown all along the range of the $0.80s/lb and into the $0.90s/lb. While a PGP nomination emerged at a $0.07/lb reduction for June, processors are expecting to unwind the entire May increase at a minimum, according to Michael Greenberg, TPE CEO.

Final thought from Michael Greenberg:

The spot resin markets were more active this past week as railcars required disposition ahead of month-end and market participants balanced their positions while considering June price expectations. PE producers have not completely postponed their $0.05/lb increase, but it will not be fully implemented in May. PP processors are looking forward to seeing prices return from the stratosphere. Although a normal flow of resin to Latin America continues to move, the rest of export market is relatively quiet and is currently not adding substantially to spot demand.