The resin markets were a bit busier in the second-to-last trading week of the year, as suppliers looked to move moderate volumes of railcars ahead of the holidays and year-end. Processors, who have seen a reduced number of spot offers during December, bought much of the well-priced resin that was offered, and some sought to build a buffer for the beginning of January when availability is expected to be tight, as producers will again push price increases, according to plastics spot-trading platform, The Plastics Exchange (TPE).
Energy markets moved in opposite directions, widening the crude oil : natural gas price ratio to a record of 31.7:1. February crude oil futures fully reversed the previous week's results, regaining $5.93/bbl to end the week at $99.68/bbl. February natural gas prices slid further, dropping another $0.027/mmBtu to close the week at $3.147/mmBtu.
Ethylene's spot market saw strength last week even though all Gulf crackers were fully operational. Ethylene for December delivery changed hands several times at $0.52/lb, up more than a penny for the week. Material for January delivery was priced with more than a penny premium over that for prompt delivery. Ethane prices were steady at $0.79/gal, widening already healthy margins for ethylene production.
Polyethylene's (PE) market saw some increased activity, but was still relatively subdued, as many market participants were gone on holiday break. Average spot PE prices slid a penny; however, they remain at least $0.01/lb higher from month ago levels. Producers have not moved off their intent to implement a $0.05/lb price increase for December PE contracts, although a number of generic prime railcars sold last week at levels about equal to those in late November, causing some to think contracts could ultimately roll steady. Supplies are reduced throughout the chain, so producers will give it another go in January.
Propylene's spot market remained under pressure. Although refinery grade propylene (RGP) prices were only steady at $0.385/lb, it was still the lowest price in 18 months. After several weeks of lower offers but no transactions, polymer grade propylene (PGP) finally traded in the spot market at $0.54/lb. This deal was done $0.035/lb below the last trade seen at the beginning of the month and $0.02/lb under December contracts, which at $0.56/lb were down $0.02/lb from November.
Polypropylene's (PP) spot market was a little softer, as average prices slipped $0.01/lb, erasing the small gain garnered at the beginning of the month. December PP contracts settled down $0.02/lb, bringing 4th quarter relief to $0.22/lb. There are some special opportunities popping up in the marketplace, according to TPE CEO Michael Greenberg, but they are mostly for offgrade priced at a nice discount. Although feedstocks for the first quarter of 2012 are still priced above spot, weakness in the propylene market has dragged the entire forward curve lower, reducing the likelihood of a serious price pop in January. Still, overall supplies are generally tight so the spot market could regain some relative strength as buyers re-enter the market in the New Year.
Final thought from TPE's Michael Greenberg
December has been a fairly quiet month, there have been spurts of activity, but the overall theme has been towards a reduction of inventory throughout the supply chain. December PP contracts dropped 2-cents; PE producers are still trying to get their nickel increase late in the month, even though spot is up just a penny in December and a major consultancy has called the market flat. Barring any surprises during the last week of the year, the market should sail quietly into 2012 just to be met again by another attempt to increase resin prices.