Overview: After a sustained period of heightened activity, spot resin trading slowed "a bit" last week, according to plastics spot-trading platform, The Plastics Exchange (TPE). Price movements were mixed, with polyethylene steady to a penny lower, while polypropylene recovered another cent. Spot monomer prices were also mixed, holding in a tight range. TPE CEO Michael Greenberg pointed out that gulf petrochemical plants that were initially threatened by Tropical Storm Bonnie saw the weather system pass without incident or tangible impact on prices.
Energy markets moved higher last week, with September Crude Oil futures rallying $2.60/bbl to close at $78.98/bbl; a price point near the top of a several month trading range. September natural gas futures picked up $0.045/mmBtu, to close at $4.563/mmBtu last Friday, with the crude oil:natural gas price ratio expanding to 17.3:1. That represents its widest gap since mid-May.
Ethylene's July prices were steady at $0.33/lb, with material for August more actively traded and rising in a series of transactions so that it's now just shy of that level. Greenberg noted that one previously downed steam cracker resumed operations, while another remains shut. Ethylene's net transaction price (NTP) is still unsettled for July; the June NTP was down $0.0525/lb to $0.395/lb.
Polyethylene's (PE) "overall complex" remains under pressure, according to Greenberg. Most PE grades were marked a penny lower last week, including high-density polyethylene (HDPE) injection and high-molecular weight (HMW) and linear low-density polyethylene (LLDPE) butene for film. HDPE blowmolding prices, which had been the weakest grade, held steady. Spot prices are currently down $0.17/lb from the April peak, and back within the range last seen during January. LDPE prices remain buoyed; steady again this week and still just a few cents off its April peak.
According to the latest American Chemistry Council (ACC) resin reports, PE producers on average ran their reactors at 89.24% in June, producing 108 million lb less resin than in May. PE exports were strong at 728 million lb, up 162 million lb. Domestic sales in June increased to 2.47 billion lb, up 115 million lb. This demand resulted in an inventory draw of 178 million lb, which left producers with 2.6 billion lb of PE on hand when July began.
July PE contracts achieved a "level of clarity", according to Greenberg. After a long month of negotiations, average PE contracts for high density and linear low will be down $0.02/lb, retracting $0.14/lb of the first quarter gains and leaving $0.04/lb "still out there." LDPE looks to held steady in July, which would keep contract prices $0.10/lb higher for the year. The industry in general has not issued price increase notices for August.
Polypropylene (PP) spot prices edged up another $0.01/lb. After rallying $0.26/lb this year through early April, spot PP prices gave back the gains in their entirety. "Perhaps not all of the losses were warranted," Greenberg said, "as the market has recovered about $0.07/lb since it found a bottom in early June."
Propylene spot market activity was on the rise last week, as refinery-grade propylene (RGP) last traded at $0.435/lb on Friday down $0.015/lb from the previous week. Polymer grade propylene (PGP) for August delivery transacted at $0.54/lb, the same price that July PGP traded at a week earlier. July PGP contracts rolled over from June at $0.555/lb. TPE noted that at about $0.10/lb, the spread between RGP and PGP is roughly twice the historic norm, but less than half of its peak earlier in the year.
According to the ACC, producers on average ran their PP reactors at only around 85% in June, producing 77 million lb less resin than in May. PP exports were slower at 125 million lb, down 18% from May. Domestic sales jumped 10% in June, increasing to 1.4 billion lb, the second highest monthly figure in two years. "When all the dust settled, producers drew 114 million lb of PP inventory," Greenberg said, adding that they started July with a relatively light 1.54 billion lb on hand.
Polypropylene contract prices rose $0.22/lb through April, gave back $0.20/lb in May/June, and have held steady in July. At this point in time, they are awaiting movement in PGP prices to provide a lead into August. "With more balanced supply/demand fundamentals leading to recent spot market strength," Greenberg said, "perhaps PP producers will again try to expand margins and raise contract prices beyond the simple change in PGP costs?"
Looking forward, Greenberg noted that as July comes to a close, PE will likely remain focused on supply and demand fundamentals for price direction, while PP will continue to look towards monomer movement. The potential game changer: the heart of hurricane season arriving in August. —[email protected]