Polyethylene (PE) buyers confirmed a $0.06/lb rise in April contracts, while most polypropylene (PP) buyers endured a $0.15/lb jump, as rising energy and feedstock prices worked their way through to resin contracts. Spot-trading platform The Plastics Exchange noted that resin market activity slowed some from the fervent pace seen during the first half of the month, but resin prices resumed their upward trek amid light spot offerings and continuously rising energy and feedstock costs. That upward pressure remains, according to TPE, as producers seek to lift commodity resin prices again in May.
Energy Markets: U.S. energy prices rallied as June futures contracts rolled to the front month. Crude oil futures recouped much of the previous week's losses jumping $2.07/bbl higher to end the holiday shortened week at $112.29/bbl. June natural gas futures had another week of near 4% gains, rising $0.202/mmBtu to $4.466/mmBtu. The crude oil : natural gas price ratio expanded out to 25:1, more than four times the ratio considered parity. This gap continues to provide integrated North American PE producers a huge cost advantage over most international PE producers that derive their feedstocks from naphtha and the crude oil chain.
Ethylene spot prices rallied sharply in heavy trading, cleanly recouping the previous week's $0.07/lb losses. This was due in part to several crackers remaining offline, reducing output by more than 5%. Material for April delivery traded all the way back up to $0.655/lb on Wednesday before the market fell silent ahead of the long holiday weekend. Ethylene for May delivery is currently around April pricing, according to TPE, while ethylene for third-quarter delivery changed hands in the mid-$0.50s/lb. High ethylene prices and extremely wide cracker margins have encouraged several initiatives to expand and build new ethylene capacity over the next few years.
Polyethylene (PE) average spot prices gained about a penny, reversing the previous week's losses. High-density polyethylene (HDPE) added a little more, as the lower margin commodity grades in particular jumped in the spot market. April PE contracts are being settled at an increase of $0.06/lb with another $0.05/lb sought for May. TPE CEO Michael Greenberg said that fresh railcar offerings have diminished as material was held back to be sold in May. National resellers and Houston traders have provided market liquidity from inventory, but only in multiple packaged truckload quantities.
Propylene had no reported spot transactions last week, but the market still maintained its upward bias. Refinery grade propylene (RGP) was bid up to $0.90/lb, a nickel higher than the previous Friday, with the lowest offer at $0.94/lb. RGP last traded in the spot market several weeks ago at $0.795/lb. Polymer-grade propylene (PGP) was bid around $0.87/lb, the level of the last transaction, but with no counter-offers surfacing it is hard to tell at what price the next spot deal will consummate. April PGP contracts settled up $0.15/lb to $0.875/lb, and market participants are already talking about higher nominations for May.
Polypropylene (PP) spot prices edged another penny higher on the heels of ever-rising monomer costs. Greenberg noted that "prices are all over the board", ranging from the mid $0.80s/lb for old-inventory offgrade material to the mid $0.90s/lb for generic prime to over $1.00/lb for branded prime. "While it does not appear that the market is ready to top, traders have become very cautious about adding to inventories at this price level," Greenberg said. April PP contracts jumped $0.15/lb along with PGP monomer contracts and fresh price increases are being talked about for May.
Final thought from Michael Greenberg
Up, up and away...resin prices continue to rally with no apparent end in sight. The huge disparity between the price of natural gas and crude oil has had a significant impact on the market. Crackers have opted to process the cheaper light feedstocks (ethane) from natural gas versus heavy feedstocks, including propane and others, derived from crude oil, limiting propylene monomer production. The huge cost advantage held by fully integrated PE producers has facilitated a large base of direct exports leading to high operating rates and tight ethylene supplies. April price increases for commodity grade resins have been solidified, with polyethylene contracts rising $0.06/lb and polypropylene soaring $0.15/lb.