TPE resin pricing: PE peak? PP and PS approach, breach $1/lb mark

Has polyethylene (PE) finally peaked after rising $0.11/lb in the second quarter and $0.04/lb at the start of the third quarter? A dip in spot ethylene prices brought a halt to polyethylene (PE) price increases last week, with some believing the apogee is here. Michael Greenberg, CEO of spot-trading platform, The Plastics Exchange (http://www.theplasticsexchange.com), said trading volume last week was below average, with domestic PE producer offerings limited. A reprieve in ethylene price increases is viewed hopefully as a harbinger of lower PE prices, although producers had already posted a $0.07/lb price increase for July. The fact that ethylene fell in spite of continued increases in crude oil and natural gas and that monomer market participants haven’t agreed to June or July contracts leave the PE market with some uncertainty going forward. Strong export demand, especially from Asia, where there has been a diversion of monomers into gasoline in preparation for the Olympics, has helped keep producer inventories under control. Looking forward, Greenberg says further price increases for PE, which currently total $0.15/lb, including $0.08/lb for August, could be challenged.

There was no reprieve in polypropylene (PP), which continued to rise and could be best described as “uncomfortable”, according to Greenberg due to limited supplies and higher prices. July polymer-grade propylene contracts were settling around $0.10/lb higher, which means PP should rise, although no one knows how much. The overall uncertainty in monomers has prompted PP producers to nominate July price increases as high as $0.18/lb, as they struggle to regain margins. Greenberg says producer offerings to the spot market have increased, with some reflecting the $0.18/lb rise. “We are looking at the highest polypropylene prices on record,” Greenberg said, “and some offers have been made above the $1.00/lb level.” At such heights, Greenberg said buyers are backing away, which is a shift from previous month’s sentiment, as they bought today to avoid presumed price increases tomorrow. Many now question if PP really can go higher. In any case, Greenberg believes July PP contracts will likely settle around $0.10/lb higher in line with monomer contract settlements, and any deviation up or down would represent margin gained or lost by producers.

Activity in the polystyrene (PS) market was slow with few buyers and less offers. High impact gained a penny while general purpose fell a penny, and spot benzene has rallied, approaching $4.50/gallon according to the PetroChem Wire (http://www.petrochemwire.com), where not too long ago $4/gallon marked a new high watermark. Given those rising costs, PS producers are looking to increase July contracts by $0.03/lb for general-purpose grades and $0.04/lb for high impact. There are limited spot offers on the market with some generic-prime supplies from producers eclipsing $1.00/lb levels.