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Summary
Spot resin trading was swift; thoughts of higher prices in February had buyers seeking end of the month opportunities. Average spot Polyethylene prices were steady to $.02/lb higher, while Polypropylene jumped $.03/lb this past week amid limited material availability and soaring feedstock costs. Jan PE contracts remain unsettled; despite producers resolve to implement the current $.06/lb increase already invoiced for Jan contracts, popular consultancies have called the market just steady and $.03/lb higher. Spot Generic Prime PE railcars are still available in the secondary market $.03 - $.06/lb higher. Polypropylene contracts rolled flat in Jan, but are poised to rise significantly in Feb on the heels of rising feedstock costs and the desire to expand resin production margins.
The US energy markets moved higher, more than reversing the previous week’s losses. March Crude Oil futures added $1.23/bbl to end the week at $99.56/bbl. Natural Gas futures finally snapped back, ending a relative free-fall that saw prices return to decade-ago levels. The March futures contract recovered $.364/mmBtu, some 15%, to settle at $2.756/mmBtu on Friday. The Crude Oil: Nat Gas price ratio contracted from the recent record level of 41:1, back down to 36:1, which is still 6X the 6:1 ratio that is generally considered parity.
The Ethylene market extended its winning streak to 6 weeks, rising further in moderate trading. The spot market took a step backwards to $.59/lb in the beginning of the week, but then surged several cents to make a new high for the move. Ethylene for January delivery last traded in the active Williams facility at $.63/lb on Friday, a penny premium over material for Feb delivery. Forward months are priced at increasing discounts; Ethylene for the delivery over the entire 2nd half of 2012 was priced at $.55/lb. Ethane shed a couple more cents to $.585/gal, Ethane to Ethylene margins are simply staggering.
The Polyethylene market remains supported by relatively tight upstream inventories and rising spot monomer costs. Spot PE prices were steady to higher depending on material; film grades were the strongest, particularly LDPE, which is suffering from production issues. HDPE supplies remain adequate, although in many cases, these prices have also ticked higher. Producers and processors continue to spar regarding the January price increase. Producers remain intent to maintain the $.06/lb increase that they have billed for Jan contracts. Buyers however, see spot sales at prices less than the current increase as well as consultancies and notable market observers who have indicated the market steady to $.03/lb higher. One thing is for certain, if producers do not get their increase in Jan, they will go for it again in Feb.
The Propylene market was active again and prices charged higher. RGP traded as high as $.64/lb, much above the Dec trough price of $.38/lb. PGP for January delivery transacted a number of times, reaching $.655/lb, nearly a dime above Jan PGP contracts. PGP for Feb delivery went on to trade once at $.705/lb; financially settled transactions for the 2nd quarter 2012 were priced just above and below this level. A producer has nominated to increase Feb PGP contracts by a whopping $.22/lb; while the spot market has certainly rallied, $.78/lb for contract PGP currently seems out of line.
Spot Polypropylene continued to rally, adding another $.03/lb; prices are now up about a nickel during January. This is significant price movement considering that PP contracts were steady in both Jan and Dec. The current deviation is based on tight inventories from end of the year de-stocking along with tempered resin production which created an under-supplied environment, and more recently the rapid-run up in spot monomer costs. Spot monomer for Jan is now nearly $.10/lb above contracts and Feb PGP traded even a nickel above that, but on low volume. The upward momentum was enough to spur one producer to seek a huge $.22/lb price increase for Feb Polypropylene contracts. Some buyers have reacted with disbelief, some with anger, while others are just trying to buy up as much well-priced spot material as possible. We have had some difficulty moving material in the low $.70s/lb, so asking prices in the high $.80s/lb come next week seems unrealistic.
The resin market’s bullish momentum has taken hold. Suppliers are trumpeting higher resin prices and are pointing to their rising costs. Polyethylene buyers eagerly retort that margin is already plentiful between Ethane and Ethylene. Polypropylene buyers might recognize that low volume trades are pushing the spot PGP market higher and might not necessarily reflect the entire market. Either way, we expect to see sharply higher asking prices in early February. PE producers will seek any part of the $.06/lb increase that might not take hold in Jan, plus an extra $.04/lb for LDPE. PP producers will be looking for a double digit increase, but it will likely fall short of the $.22/lb that has just been nominated. Hold on to your hats, this ride could get a bit bumpy.
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Total Offers
18,194,728 lbs
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Spot
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Contract
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| Resin | Total lbs | Low | High | Bid | Offer |
| HDPE - Blow Mold | 3,659,636 | $.620 | $.700 | $.640 | $.680 |
| LLDPE - Film | 3,096,876 | $.660 | $.740 | $.660 | $.700 |
| LDPE - Film | 2,628,692 | $.700 | $.770 | $.720 | $.760 |
| PP Homo | 2,343,312 | $.680 | $.770 | $.700 | $.740 |
| HDPE - Inj | 1,755,312 | $.630 | $.710 | $.650 | $.690 |
| PP Copo | 1,704,576 | $.700 | $.800 | $.720 | $.760 |
| HMWPE - Film | 1,322,760 | $.690 | $.740 | $.690 | $.730 |
| LLDPE - Inj | 530,920 | $.660 | $.720 | $.680 | $.720 |
| HIPS | 464,000 | $.930 | $.960 | $.940 | $.990 |
| GPPS | 380,000 | $.850 | $.870 | $.840 | $.890 |
| LDPE - Inj | 308,644 | $.690 | $.760 | $.700 | $.740 |
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