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Market overview: Demand was good, supplies were tight, and prices rose sharply in spot resin trading during the first week of April. Spot-trading platform The Plastics Exchange (TPE) reported that energy and feedstock costs continue to climb higher, helping reinforce producer efforts to fully implement the price increases nominated for April contracts.

PlasticsToday Staff

April 12, 2011

4 Min Read
TPE resin pricing, April 4-8: PE up $0.04/lb, PP up $0.06/lb; strong demand, tight supplies and rising feedstocks propel

Market overview: Demand was good, supplies were tight, and prices rose sharply in spot resin trading during the first week of April. Spot-trading platform The Plastics Exchange (TPE) reported that energy and feedstock costs continue to climb higher, helping reinforce producer efforts to fully implement the price increases nominated for April contracts. These include $0.06/lb for polyethylene (PE) and somewhere between $0.10 -$0.16/lb for polypropylene (PP), depending on where April polymer-grade propylene (PGP) contracts settle. TPE CEO Michael Greenberg said that while processors will complain that these increases will be difficult to pass through, cost-push pressures and relatively low inventories along the supply chain lend support to the increases.NF_TPEprices.jpg

TPE resin prices, April 8, 2011

Energy markets: U.S. energy prices moved sharply in opposite directions, as May crude oil futures continued to rise, adding $4.85/bbl to end the week at $112.79/bbl, their highest close in two-and-a-half years. At the same time, May natural gas futures shed more than 7%, dropping $0.321/mmBtu to settle at $4.041/mmBtu on Friday. The crude oil : natural gas price ratio shot out to 27.9:1, the widest level on record. North American ethylene and integrated PE producers are enjoying significantly lower costs compared to most other international PE producers, aiding their direct PE export sales, which has also helped to keep the domestic resin market tight.

Ethylene's spot market was active and prices rallied further in high-volume trading. A couple of crackers have been taken offline for maintenance adding additional upward pressure to an already tightly supplied market. Ethylene for May delivery traded several times last week with the final transaction at $0.655/lb, up about $0.03/lb. May ethylene was sold a couple cents below this level. The entire forward curve has shifted higher with the largest gains seen in the front months. Ethylene for delivery during the second half of 2011 could be procured in the $0.50s/lb. The net transaction price for March ethylene settled at $0.5375/lb, up almost $0.05/lb from February. April NTP has not been declared.

Polyethylene (PE) spot prices jumped $0.04/lb as buyers scooped up packaged material offered by traders. Soaring ethylene costs have eaten into producer margins discouraging spot sales at current price levels. TPE noted that even with the April $0.06/lb increase included, producers are showing very few fresh railcars to the spot market. TPE described resin consumers predicament. "Processors complain of rising resin costs that are damaging their demand, while they begrudgingly submit purchase orders for the much needed resin." Spot exports to Latin America remain good, while European demand for North American PE has quieted down, with buyers citing competitive offers from Middle Eastern and Asian traders.

Propylene has maintained its upward momentum as supplies remain scarce. The huge price difference between crude and natural gas and its derivatives has encouraged the cracking of lighter feedstocks, limiting propylene production. Refinery-grade propylene (RGP) traded up $0.04/lb to $0.795/lb and was subsequently bid later in the week as high as $0.8125/lb. PGP did not appear to have transacted in the spot market, but bids were raised to $0.8375/lb, well above the previous transaction seen a couple weeks ago at $0.77/lb. Strength in the spot market caused several monomer producers to renominate their April price increases from $0.10/lb to $0.12 -$0.16/lb. March PGP contracts settled at $0.725/lb.

Polypropylene (PP) spot prices swung $0.06/lb higher last week as monomer prices continued to climb and producers upwardly revised their price-increase nominations. Spot resin trading has become challenging as skyrocketing prices have dazed buyers and well-priced offers are regularly pulled off the table. Prime offers practically skipped right through the $0.80s/lb, with prices heard now along the full range of the $0.90s/lb. The offgrade market is scattered, asking prices for near-prime were raised into the high $0.80s/lb while lower grade resin is barely (and sometimes not even) keeping up with spot monomer prices. Exports beyond Latin America are virtually shut off based on price.

Final thought from Michael Greenberg

Commodity resin prices jumped the first full week of April. Of course, a major retracement in upstream costs would shake the resin market; however, as long as energy and feedstock prices continue to increase, expect producers to be successful implementing their price increases. At the moment, the April polyethylene increase seems firm at $0.06/lb and the May $0.05/lb should not be forgotten. Unrelenting spot PGP costs triggered the revision of PP price increases from $0.10/lb to "whatever PGP monomer does", which is currently looking like an increase of $0.12-.16/lb. PP prices are near record highs, which cannot be good for long-term demand. 

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