TPE resin pricing, April 11-15: PE dips $0.01/lb; PP up $0.02/lb; plastics catching up to raw material, energy inflation

Spot polyethylene (PE) eased a bit last week from the $0.04/lb gains it ran up in early April, while polypropylene (PP) jumped another $0.02/lb, lifting monthly increase to $0.08/lb. Spot-trading platform, The Plastics Exchange (TPE) noted that spot PE is still up about $0.03/lb for the month, with "substantial" price increases planned for April contracts. PE producers are seeking to add $0.06/lb, while PP producers target an increase that will mirror gains in the April polymer-grade propylene (PGP) contract.

TPE resin prices, April 15, 2011

Energy markets: U.S. energy prices reversed recent trends with oil going weaker and natural gas firming up. May crude oil futures dropped from 32-month highs and shed $3.13/bbl to settle at $109.66/bbl on Friday. May natural gas futures added $0.163/mmBtu, to jump about 4% and finish the week at $4.204/mmBtu. The crude oil : natural gas price ratio contracted significantly to 24:1, but is still about four times above the ratio considered parity.

Ethylene's spot market gave up a chunk of its recent gains before firming a bit on Friday. Ultimately, however, it dropped by almost $0.07/lb for the week. Ethylene for April delivery transacted at $0.6525/lb on Monday, which was steady, but then fell sharply on Tuesday, trading as low at $0.585/lb, before being bid back up to $0.595/lb on Friday. The market appeared to come under pressure after two days of sharp losses in crude oil and word that an offline ethylene cracker would go back on-stream later in the week. While the entire forward curve fell in price, the majority of the losses were seen in the nearby months. Ethylene's net transaction price (NTP) for March was $0.5375/lb, and while April's NTP has not yet been agreed upon, it should be higher.

Polyethylene's (PE) spot market gave back $0.01-$0.015/lb from the steep gains seen the first week of April, but is still about $0.03/lb higher at mid-month. TPE CEO Michael Greenberg noted that the PE market was clearly "fast out of the gate" as producers were adamant about implementing a cost-push $0.06/lb April price increase. Some momentum was lost, however, when ethylene monomer plunged $0.07/lb on Tuesday. TPE believes that in all likelihood, most, if not all of the proposed increase will be enforced as resin supplies are limited and margins for the commodity grades remain tight.

Propylene spot prices were higher in relatively quiet trading, and refinery-grade propylene (RGP) did not appear to transact in the spot market, but was bid up to $0.85/lb, about $0.04/lb above the previous Friday's bid and well above the last transaction seen at $0.795/lb. Polymer-grade propylene (PGP) changed hands at $0.87/lb, a dime higher than the last spot deal recorded almost a month ago, although the market had been bid higher along the way, reaching nearly $0.84/lb last Friday. April PGP contracts have initially settled up $0.15/lb to $0.875/lb, but TPE stresses this is not marketwide. Contracts were initially nominated to increase just $0.10-$0.12/lb.

Polypropylene (PP) spot prices added another $0.02/lb, building on the $0.06/lb leap seen in the first week of April and the nearly $0.08/lb jump in March. Scarce monomer supplies and soaring costs continue to rock the PP resin market. With PGP contracts initially settling at $0.875/lb, most prime PP offers are in the mid-$0.90s/lb with some grades starting to push towards $1/lb. Offgrade is struggling to keep up with monomer, so for those that can handle widespec, there are relative deals still to be had, according to Greenberg.

Final thought from Michael Greenberg