Stretchwrap Markets Review - PE Tight, Prices Higher Across the Chain
May 16 to June 15 2009, Vol. 1 Issue 06 Stretch film processors eyed rising polyethylene prices and tight supply as ethylene monomer, NGLs and crude oil all advanced in the second half of May and first half of June. In May they released price announcements of their intent to increase stretch film prices 5% in mid June.
Resin producers in May reportedly implemented an increase of about 3 cents per pound (cpp), which would account for a total of 10 cents of increases implemented between January and May. Resin producers are seeking to implement an additional 3 cent increase in June, followed by another 8 cents in July. While many processors said it is still not officially determined as to whether the 3-cent increase in June will be implemented, some resin buyers said they are seeing this reflected in their pricing. It is still too early to determine if the July initiative of 8 cents will hold. As of June 17, prices for generic prime railcars of LLDPE film butene grade were in the high 40s cpp to low 50s cpp range.
In the spot market availability of generic prime and widespec PE has been limited. Producers have reportedly maintained a policy of only producing for orders placed before the start of the month. Of the available spot material much of the material was exported to Asia in April and May. This has continued so far in June.
A recent rise in ethylene monomer spot prices has also lent support to the PE market. Ethylene has traded in recent days in the 27-27.25 cpp range, which is up from 22 cpp in mid May.
Further upstream, ethane reached 59.625 cpp on June 11, before backing of to current prices in the low 50s cpp range. This compares with prices in the low 40s cpp in mid May. Propane, butane and natural gasoline also rose during this time period. Steam cracker operators have been favoring lighter feedstocks, such as ethane and propane, over heavy feeds, such as natural gasoline in recent weeks. However, the recent rise in all NGLs has squeezed ethylene profit margins, leading to some speculation that cracker operating rates will ultimately be throttled back. This would tighten ethylene monomer supply.
A steam cracker is the unit where ethylene monomer is produced. Many steam crackers in the US have the ability to crack a range of NGLs, with ethane being the lightest feedstock, to natural gasoline, which is the heaviest. The feed slate can change daily depending on the economics. The lighter the feedstock, the more ethylene the steam cracker yields. Conversely, if ethylene producers started cracking heavy feedstocks in the future, this would significantly tighten ethylene monomer supply, which could translate into higher polyethylene prices.
For more podcasts in this Stretch Wrap Markets Review series click here.
_____________________________________
The PetroChem Wire is a daily newsletter serving the petrochemical industry. It counts every major chemical and refining company among its subscribers, as well as many major manufacturing concerns, global conglomerates, industry consultants, equity analysts and government agencies.
Contact:
Mark Quiner, Senior Editor
+1 713 331 0464
mark@petrochemwire.com
www.petrochemwire.com
Copyright 2009