Spot resin trading activity improved and polypropylene rose $0.015/lb after a slow start to July, although fresh material offerings remained modest, with much of the discretionary material shipped offshore into what's become a rising export market. Spot-trading platform, The Plastics Exchange (TPE) noted that there has been some price consolidation with the low end of the Houston area market "cleaning up", while top-end domestic contract prices experienced some pressure. The third attempt to implement the $0.05/lb polyethylene price increase in July seems likely to fail, and TPE believes there is a good chance that contracts will actually be marked lower. Polypropylene (PP) contracts will drop $0.04/lb commensurate with the change in polymer-grade propylene (PGP) contracts, in the meantime, spot PP prices rallied $0.015/lb last week.
Energy prices were higher as the front-month futures contract rolled to September. Crude oil futures for that month continued to rise adding $0.90/bbl to settle at $97.60/bbl last Friday. September natural gas futures rebounded sharply, snapping back 7.5% to finish the week at $4.52/mmBtu, for a gain of $0.316/mmBtu. The crude oil : natural gas price ratio contracted to 21.6:1.
Ethylene spot material for July delivery traded in a fairly wide $0.04/lb range, despite the fact that as TPE noted, relatively few pounds actually changed hands. The last transaction was reported at $0.595/lb, up nearly $0.02/lb for the week. The forward months did not see too much activity, with some of the strength seen for prompt material attributed to short-term complications at another cracker. The Net Transaction Price (NTP) for June ethylene was $0.5675/lb, down $0.0175/lb.
Polyethylene (PE) spot prices in the domestic market were steady to lower, but TPE said "notable" gains were seen in what had been a sharply-discounted export market. Continued recovery in the Indian and Asian regions cleared a good deal of surplus inventories, and Latin American buyers are turning back to North American suppliers for added material as competitive offers from aforementioned regions have dwindled. While domestic PE railcar offerings were somewhat limited, prices eased a bit as producers generally abandoned their $0.05/lb price-increase attempt. Processors are now looking to maintain downward pricing pressure and achieve a second month of contract price decreases.
Propylene's spot market traded higher, with material for July delivery transacting at $0.77/lb, $0.03/lb above the previous trade seen several weeks ago. Refinery grade propylene (RGP) also ticked higher with several deals for July delivery completed around $0.68/lb, with the most recent at $0.6825/lb. July polymer grade propylene (PGP) contracts settled at $0.78/lb, a $0.04/lb decrease, which was a bit larger than the $0.02/lb break initially nominated.
Polypropylene (PP) continued to recover, rebounding another $0.015/lb, as the selloff over the previous eight weeks continues to be reeled back. The low-end of the market bounced several cents amid good export demand, but Houston prices for widespec materials are still regularly offered below spot-monomer costs. PP contracts, which have been locked in step with PGP contracts, will settle down $0.04/lb, more than initially indicated but not as much as many processors had hoped. Clarity in July monomer costs helped producers refine their generic-prime offers, which remain available to the spot market due to a surplus of upstream resin inventories.
Final thought from Michael Greenberg
A second straight month of price relief will be provided to contract buyers of commodity grade resins. Average PP contracts will be off $0.04/lb in July, while PE contracts appear to at most be steady and possibly lower. Rising international resin prices are again providing for better export demand and good support to the market, potentially limiting downside movement.