TPE Prices for North American Resins

31 Mar 2010 • by Natalie Aster

Polyethylene (PE) spot trading was active and prices softened another $0.005/lb last week, easing along with the spot ethylene market. Resin prices had been as much as $0.07/lb higher in early March, according to spot plastics-trading platform, The Plastics Exchange (TPE), but they began to come down in conjunction with spot monomer. Spot PE prices are now $0.02/lb lower for March, but remain $0.16/lb higher since the beginning of 2010. Resin producers have successfully implemented their $0.06/lb increase for March, and contracts are now up a total of $0.18/lb for the year. An additional $0.05/lb increase has been nominated for April contracts, but with the March increase fully implemented, some believe that the PE market rally has run its course.

TPE CEO Michael Greenberg said the spot monomer market also appears to have peaked in March at $0.70/lb. Ethylene for immediate delivery was trading at $0.65/lb last week, and going forward, there had been a very steep discount for April monomer, pushing as low as $0.52/lb. The spread has closed considerably with more recent April bids up to $0.63/lb. Some market watchers anticipate spot ethylene will further soften during April, as additional crackers are brought back on-stream, and ethylene operating capacity is pushed up near 92%.

PE inventories remain thin according to Greenberg, as rising spot monomer costs and a soft export market have discouraged discretionary resin production. According to data recently finalized by the American Chemistry Council (ACC), producers manufactured just 2.959 billion lb of PE during February-145 million lb below the trailing 12-month average and the least since February 2009. The reduced production mostly offset the sharp drop in export sales, but there was still a modest inventory build of 39 million lb to just over 2.7 billion lb at the end of February. Continued scarce and expensive monomer likely led to restrained production in March as well. The ethylene net transaction price (NTP), a key component of the overall cost PE producers pay for their feedstock, was up $0.095/lb during January and February, but has yet to settle for March. While contracts are up $0.18/lb during 2010, spot ethylene is up about $0.28/lb in 2010 at current market values.

Greenberg said TPE anticipates a slow period ahead, with month-end coming mid-week and a price increase on the table for April. The exchange expects limited spot offerings early in the month and believes major players will take a wait-and-see approach to the market.

Polypropylene (PP) rallied further last week, adding another $0.01/lb, with March spot prices now up $0.06/lb and outpacing the average contract increase of $0.05/lb. Since the start of the year, spot PP prices are up $0.22/lb, well in excess of the contract gain of $0.15/lb, which is commensurate with the $0.15/lb increase seen in contract polymer grade propylene (PGP). "Buyers need to brace themselves," Greenberg warned, "as contract polypropylene prices are poised to move sharply higher yet again in April."

Evidencing that, last week a monomer producer issued a $0.11/lb increase for April PGP monomer contracts. That announcement was followed quickly by PP contract increase nominations. "[TPE] has seen letters by two producers," Greenberg said. "One for $0.11/lb and the other $0.12/lb."

Those increases have been fueled by a spot propylene market, which last traded at $0.79/lb, up some $0.105/lb over the February PGP contract price of $0.685/lb. Greenberg noted that with so many resin contracts now tied directly to the change in monomer costs, it is likely that April PP contracts will again move in line with the PGP contract settlement.

Overall PP demand has been poor, and the flow of wide-spec material has been strong, giving participants plenty of opportunities to buy ahead of the increases. For those that could handle offgrade resin, Greenberg said landing multiple railcars of "near-miss" material in the low-to-mid $0.70s/lb had been possible.

Upstream, steam crackers that are able to switch have opted to use light feedstocks, such as ethane rather than heavy feedstocks like propane, due to a cost advantage. That shift has limited refinery grade propylene (RGP) volumes and contributed to the increase in RGP prices. In addition, insufficient splitter capacity has restricted the ability to further refine RGP, keeping upward pressure on the PGP monomer market.

Greenberg noted that with spot PGP priced in the mid $0.70s through May, it seems that PP prices will remain elevated for the near-term. A new propylene plant with 1.2 billion lb/yr capacity is slated to come on-stream during the summer, but that's little comfort to PP market participants staring down more increases. "[This summer] is still a long way off," Greenberg said. "For now, expect higher contract polypropylene prices in April."

Source: PlasticsToday Staff


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