TPE North American resin pricing, July 12-16: PE lower; PP up; activity on the rise


Overview: The spot resin markets remained fairly busy last week, driven by a steady flow of demand that saw a large number of deals concluded. Spot-trading platform, The Plastics Exchange (TPE), noted that prices remained mixed, with the polyethylene market still under pressure while polypropylene continued to recover. Spot monomer prices firmed in reaction to a new cracker outage. Spot exports slowed, and TPE says there is currently a large spread between domestic and Houston export prices.

Energy markets in the U.S. were relatively calm, as crude oil for August delivery dropped $0.08/bbl to close at $76.01/bbl. After three weeks of losses, natural gas futures finally posted a gain, as the August contract recovered $0.119/mmBtu to end the week at $4.519/mmBtu. The crude oil:natural gas price ratio now sits just below 17:1; a relationship that is still very wide compared to the 6:1 ratio that's traditionally considered parity.

Ethylene's spot market started steady at $0.295/lb but then rallied in heavy volume, with gains increasing as the week wore on. By Friday, Ethylene for July delivery reached above $0.33/lb, a gain of more than 12%. Forward months also traded higher, but still at a discount to material sold for prompt delivery. Ethylene's net transaction price (NTP) has yet to be declared for July, with June's NTP closing down $0.0525/lb to $0.395/lb.

Polyethylene (PE) spot prices were mostly lower this week, with a variance again seen between grades. High-density polyethylene (HDPE) prices for blowmolding, film, and injection all fell between $0.01-.$0.02/lb. Film grades remain more scarcely supplied and consequently, prices for linear low-density (LLDPE) and low-density (LDPE) held steady. A high-profile auction for HDPE blowmolding basis Houston ended about $0.02/lb lower than the previous auction earlier in July. PE contract negotiations persist, with buyers looking to pull prices down another $0.02-$0.04/lb in July, while producers would like to hold prices steady. Contracts for all commodity PE grades increased $0.18/lb during the first quarter of 2010. HDPE/LLDPE contracts came off $0.12/lb in May/June while LDPE prices were only down $0.08/lb.

Propylene's spot market "finally awoke," according to Michael Greenberg, TPE CEO. After several weeks of illiquidity and no trades to speak of, at least a couple refinery-grade propylene (RGP) transactions were concluded, with prices moving a couple cents higher to $0.45/lb. Spot polymer-grade propylene (PGP) changed hands at least twice at $0.54/lb, which was a quarter-cent above the prior week. July PGP contracts initially settled at $0.555/lb, holding steady to the June price, and the rollover appears to have been established market-wide.

Polypropylene (PP) prices picked up some momentum this past week, jumping another $0.025/lb. The spot market traded at a steep discount to contracts in May and into June as some participants expected the monomer/resin price slide to continue in July. TPE reports that offgrade railcars regularly transacted in the low-mid $0.50s/lb, around the price of PGP monomer. Some generic-prime deals were seen at slightly higher levels. However, the propylene monomer market stabilized in early June, and PP prices have since "snapped back" according to Greenberg, with offgrade trading up into the $0.60s/lb, and generic-prime homopolymer PP railcars rarely seen in the mid $0.60s/lb, which is about $0.10/lb over PGP monomer. PP contracts look to hold steady in July, after skyrocketing up $0.22/lb from January through April, and then careening back to earth as they gave back $0.20/lb between May and June. At present, they're currently holding on to a $0.02/lb gain for the year."Resin trading activity has made a decisive improvement now that the markets have abated their steep decline," Greenberg said, with spot PP seeming to have again found value relative to PGP prices. Spot PE, meanwhile, is still slipping lower, but could find support if the recent ethylene cracker outage proves troublesome or if other disruptions develop. "As we suggested last week, given the magnitude of second quarter price relief and ample upside potential (hurricanes, etc.)," Greenberg explained, "overly aggressive resin inventory positions are not sensible at this time.