Polyethylene (PE) activity was high last week, but there were more inquiries than actual transactions as prices continued to slide, dropping another $0.01-$.02/lb. Spot-trading platform, The Plastics Exchange (TPE) reported that spot resin availability improved last week, pushing prices lower than when the month began. Producers were unable to implement the $0.05/lb price increase that they sought in April, but contract prices remain $0.18/lb higher for the year.
After reaching $0.74/lb earlier in the month, the spot ethylene market has dropped with prompt delivery down to $0.57/lb. Ethylene for May delivery has traded at $0.53/lb, while monomer for June delivery has reportedly changed hands at $0.40/lb. Michael Greenberg, TPE CEO, said that despite the fact that bearish sentiment is spreading through the market, spot PE prices are so far holding up. Generic-prime railcars for immediate shipment are mostly priced in the high $0.60s to low $0.70s/lb, but some sellers are already offering discounts for May shipments, anticipating a price break. While spot supplies have increased, PE availability is not widespread amongst all grades. Linear low-density polyethylene (LLDPE) butene barefoot can be sourced at discounted prices, but prime butene with additives maintains a premium as do hexene and octene grades. There have been growing offers for widespec low-density (LDPE) film grade, but prime clarity is hard to find. High-density polyethylene (HDPE) blowmolding for household/industrial cleaner is sold at a discount, but milk-bottle grade still carries a premium. All PE injection grades, including HDPE, LDPE, and LLDPE, are still somewhat scarce.
The American Chemistry Council (ACC) released its final PE figures for March with some surprising results, according to Greenberg. Even though spot ethylene prices reached $0.70/lb during March, providing an enticing outlet, producers mostly converted their monomer supplies, running their PE reactors at more than 96% of capacity, the highest rate since July 2008.
Although large-volume spot export deals in March did not appear possible based on price, exports still totaled 665 million lb. While this was about 20% below the trailing 12-month average, it was still a very strong figure by historic standards. Domestic PE sales were 2.44 billion lb, 122 million lb above the trailing 12-month average. Producers also built 122 million lb of inventory, bringing their total stockpile to 2.83 billion lb at the end of March. Greenberg said some processors currently claim to be well stocked with resin, allowing them to forgo restocking until the end of May. "With monomer prices easing and domestic buyers backing away," Greenberg said, "the export market might be transitioning back to the forefront."
Polypropylene (PP) has come under severe pressure induced by tumbling propylene monomer prices. Spot PP resin availability has grown and prices plummeted $0.08/lb in the past week alone, erasing the month's previous gains and then some. Greenberg said the current spot PP market is in stark contrast to April PP contracts, which settled up $0.07/lb early in the month on the basis of increases in polymer-grade propylene (PGP) contracts. Since the beginning of 2010, however, PP contracts are still up $0.22/lb.
After enduring four consecutive months of price increases, PP buyers are "happy to get out of the way and allow the market to readjust to a more historically average price," according to Greenberg. Many processors are now buying their minimal contracted volumes and trying to cancel orders, anticipating lower prices ahead. This has quickly caused inventories to swell, at least in the short-term, bringing liquidity to the spot market. TPE said that while dozens of widespec railcars remain offered, interested buyers are only picking up small volumes. "Customers that traditionally might be looking for 4-5 railcars are now seeking just one," Greenberg said, "or perhaps a just few truckloads to tide them over until May."
Over the past few weeks, the spot PGP market has lost $0.14/lb to $0.65/lb, with spot PGP more than a dime below the April PGP contract price. Refinery grade propylene (RGP) prices have also plummeted, dropping to $0.39/lb last week, which is at least $0.20/lb off from the most recent peak. Given upstream monomer declines, it is expected that PP contracts will fall sharply in May.
According to preliminary ACC data, PP producers ran their reactors at more than 90% capacity in March, a pace eclipsed only once in the last two-and-a-half years. For the third month in a row, exports fell short of 100 million lb, and producers' inventories were nearly steady, pushing all the extra production out to processors. With their coffers full, processors in general are in the position to work down inventories and wait for lower prices ahead. "Although May PP contracts will most likely move lower," Greenberg said, "there are good opportunities already available; so feel free to send us your orders, resin is on sale!" —[email protected]