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TPE North American Resin pricing, Jan. 4-8: PE and PP start the new year up $0.04/lb

Polyethylene (PE) spot prices surged last week by $.04/lb, with some processors caught short of material and in quick need of resin after the final two weeks of 2009 wrapped up with very little supply. Mike Greenberg, CEO of spot-trading platform The Plastics Exchange (TPE), reports that processors had little choice but to pay the steep asking price from suppliers with inventory to sell.

Polyethylene (PE) spot prices surged last week by $.04/lb, with some processors caught short of material and in quick need of resin after the final two weeks of 2009 wrapped up with very little supply. Mike Greenberg, CEO of spot-trading platform The Plastics Exchange (TPE), reports that processors had little choice but to pay the steep asking price from suppliers with inventory to sell. When fresh producer offers emerged, they were priced $0.07/lb higher than December levels, reflecting the thrice-rejected $0.04/lb increase, as well as the $0.03/lb increase nominated for December. The steep increase caught market participants off guard, but weighed against higher energy prices and rallying ethylene, they seemed more realistic. This was particularly true when a increase of $0.05/lb was nominated for February. In the spot market, supplies of linear low-density polyethylene (LLDPE) and low-density polyethylene (LDPE) film grades remained "excruciatingly tight", according to Greenberg, but increased supplies of high-density polyethylene (HDPE) injection and blowmolding were available.

TPE's resin market report, Jan. 8, 2010
Jan. 8, 2010 market update, courtesy, The Plastics Exchange
The American Chemistry Council's (ACC) finalized November production statistics show that PE producers ran their reactors at 90.44% of nameplate capacity, exporting a record 886 million lb of PE, while shipping 2.204 billion lb (exactly 1 million tonnes) domestically. Producers built about 31 million lb of inventory, increasing the end-of-November level to 2.856 billion lb, which is 567 million lb below November 2008 levels, but up 300 million lb from the June 2009 low. "Without a doubt, the balance of pricing power is currently in the tight grip of PE producers," Greenberg declared.

Export demand continues to support the PE market, with Asian buyers snapping up any reasonable offers that were available as trading opened last week. Market activity was stoked by talk of the Chinese market being short if material paired with rumors that production issues at Middle Eastern resin manufactures would limit first quarter supplies destined for Asia. As a result, export prices out of Houston rose by $0.05/lb.

Polypropylene (PP) mirrored PE's fast start to the year, rallying about $0.04/lb last week as buyers grabbed material in hopes of beating the proposed January price increases, which average $0.04/lb. The increases come as producers face higher feedstock costs, with spot refinery-grade propylene (RGP) monomer rising more than $0.03/lb last week to $0.5125/lb, while spot polymer-grade propylene (PGP) traded at $0.55/lb. Upstream, market participants already agreed to settle January PGP monomer prices up $0.03/lb to $0.57/lb, giving resin producers a minimum increase target to shoot for. Spot PP availability is tight, and although prices have been bid up and retain upward momentum, buyers appear willing to keep purchasing a bit more material than they actually need, anticipating even higher PP rates.

The ACC's finalized November statistics show PP producers ran their reactors at 85.25% of nameplate capacity. There were 152 million lb of exports, which while better than anticipated, was still off 9% from October. Domestic PP sales were 1.272 billion lb, coming in higher than the 2009 average, and producer inventories decreased 15 million lb to 1.502 billion lb. TPE anticipates that January PP contracts will at least match the $0.03/lb increase seen in monomer contracts, but Greenberg says participants should remain wary of domestic demand and the sustainability of lofty price levels if energy and feedstock costs were to soften. [email protected]

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