Weekly resin update: PE prices slide, as PP rises

The polyethylene (PE) market was well supplied across all commodity grades; spot prices slid $0.02/lb this past week and a contract price decrease is likely this month. The polypropylene (PP) market has been firm, as overall supplies are tight; prices added $0.01/lb and another margin-enhancing price increase is imminent in January. International PE prices are well below the domestic North American market, prompting huge discounts for resin destined to be exported. PP is seeing a growing movement toward prime imports into the United States, while some off grade is still being exported.

Ethylene trading activity increased and prices dropped to fresh multi-year lows. All Gulf crackers are fully operational, providing an overly abundant supply of monomer to the market, reports the PlasticsExchange. The price for January ethylene worked its way down during the course of the week and most recently transacted at $0.16/lb, a loss of $0.025/lb. Forward ethylene saw similar losses. The market, reflecting some tightness during the upcoming turnaround season, is now set to peak at $0.19/lb in April, before shaving off $0.015/lb by the end of 2016.

Spot PE trading was busy; material availability was high and prices fell $0.02/lb. It's a buyers' market, as suppliers aggressively marketed their uncommitted inventories, eager to take a quick loss and restock with cheaper material. Processors picked away with just small orders, as needed, confident that lower prices lay ahead. While some producers are still officially trying to implement their $0.05/lb increase—which has consistently failed since October—some have pushed the increase into February, and one producer has bucked the trend, decreasing January contract prices by $0.03/lb. Considering the overwhelmingly bearish sentiment, plummeting energy and feedstock costs, and lower international price levels, a marketwide contract price decrease is well warranted this month, says the PlasticsExchange.

Spot propylene trading heated up and prices edged higher. PGP for January delivery most recently changed hands at $0.295/lb, a small fractional gain. Based on spot levels, January PGP contracts are poised to roll steady from December at $0.32/lb. RGP transacted just shy of $0.19/lb, providing splitters with a healthy dime margin.

Spot PP trading was a little better than average, with generally tight availability causing prices to rise by a cent. While occasional production issues have roiled several producers, overall operating rates have improved, says the PlasticsExchange. PP demand remains strong, and processors, facing another price increase, continue to search for well-priced spot offers to augment their direct supply. Most producers are seeking a $0.06/lb price increase in addition to any change in PGP monomer (which should remain flat). The increase is a large pill for processors to swallow. As such, PlasticsExchange analysts expect only some of the increase to stick. PP prices around the globe are well below North American levels and this trend appears to have legs.

Read the full Market Update on the PlasticsExchange website.