TPE North American resin pricing, Jan. 11-15: PE, PP rise; PP already up $0.08/lb in ‘10

Polyethylene (PE) spot prices were just $0.005/lb higher last week in spite of overall supplies remaining tight, with certain materials, including film grades, outright difficult to source. Michael Greenberg, CEO of plastics spot-trading platform, The Plastics Exchange (TPE) noted that the increase was muted given that January resin trade started off extremely strong, driven by rising energy and feedstock costs, generally light inventories throughout the resin chain, pent-up spot domestic demand, insatiable export outlets, and producers pursuing $0.07-$0.08/lb of price increases for January contracts.

After crude oil prices dropped more than 5%, and with Chinese New Year just a month away, international resin traders are still actively purchasing material for their respective markets, but higher Houston prices are encouraging back-to-back transactions rather than a "buy-now-and-sell-higher-later" approach. Producers seem to have relented from their staunch position to enforce both the old $0.04-$0.05/lb increases, as well as the $0.03/lb increase sought in December.

The American Chemistry Council (ACC) has released its preliminary December statistics, which show PE producers slowed production in the final month of the year, running reactors at just 86.41% of nameplate capacity—well below the previous five-month average of 92.25%. Another record level of exports was achieved, sending offshore just one container shy of 900 million lb, so that foreign shipments accounted for nearly 28% of total sales in December. While domestic sales and ending inventories were not released, they could be extrapolated as 2.32 billion lb of sales with a subsequent inventory draw of approximately 83 million lb.

It now seems that just a $0.04/lb increase will become solid for January contracts with more on the horizon for February. Processors were staring at a sharper increase in January, and producers will finally implement their $0.04/lb price boost on their fourth attempt. "Perhaps both buyers and sellers can feel that they came out ahead—for a change," notes Greenberg.

Polypropylene (PP) spot prices added another $0.04/lb, pushing them up $0.08/lb during the first half of January—a marked departure from lackluster market activity seen in December when a mostly steady spot market lagged the contract market, which was on average up about $0.04/lb.

On average, PP producers nominated a $0.04/lb price increase for January contracts, with the monthly change in contract PP resin prices closely pegged to contract polymer-grade propylene (PGP) prices. PGP is up $0.03/lb in January.

Resin inventories amongst all typical PP market participants are quite low and spot supplies are very tight, giving processors in quick need of material little choice but to pay the sharply higher spot offers, according to Greenberg.

As would be expected, the ACC's preliminary December statistics show a North American market that's short of material. Although domestic sales of 1.167 billion lb and export sales of only 111 million lb were both below average, in aggregate, PP producers ran their reactors at only 71.4%, significantly below the previous 11-month average of 84.15%. This production shortfall caused an extrapolated inventory draw of more than 240 million lb, leaving producers with a paltry 1.26 billion lb of inventory at year-end. "Buyers are actively seeking spot material and at least for the moment, prices appear to be driven by supply-demand dynamics rather than simply defaulting to the change in monomer prices," Greenberg said. —[email protected]