Stretchwrap Markets Review - Upward Pressure on PE Continued While Upstream Markets Fell
June 15 to July 16 2009, Vol. 1, Issue 07 Polyethylene film prices strengthened from the middle of June to the middle of July amid tight supply. Meanwhile, ethylene spot prices fell in line with a sharp drop in NGLs prices.
In June, producers implemented a 3-cent increase in June PE prices. They had originally proposed increases of 8 cents per pound (cpp) for July. However, some producers subsequently rescinded the 8-cent increase initiative and instead said they would seek to raise prices 4 cpp in July and another 4 cpp in August. By the middle of July, many participants said they were still in discussions about whether these increases would stick.
Some processors said they had reached agreements to push the July 4-cent increase out to August, and a growing chorus of market participants said they were doubtful the increase would stick this month, eyeing falling prices upstream and weak demand. While buyers pointed to poor demand, however, others noted that supply remains tight as producers continue to operate at low rates and exports continue to move from the US Gulf coast.
In the spot polyethylene market, spot transactions for generic prime railcars of LLDPE film butene grade moved from the high 40s cpp to the low 50s cpp range from mid-May to mid-June. However, trading was thin in for much of the first half of July as sellers raised offers for fresh railcars even higher and buyers kept bids low amid uncertainty about the outcome of the 4-cent increase initiative.
Upstream, ethylene spot prices fell 29% from the 26-27 cpp range in mid-June to 19 cpp on July 10, their lowest point since December 2008. Prices were down amid broad weakness in NGLs prices, adequate supply, and continued favoring of light feedstocks. Cracking light feedstocks, such as ethane and propane, yields more ethylene and less propylene. Ethylene prices received a slight lift on July 13 and July 14, trading up to 19.875 cpp. This came as NGLs ticked higher and news of an unplanned outage at a Port Arthur, Texas-area steam cracker hit the market.
Ethane prices fell 34% from mid-June to mid-July. In the middle of June, prices were around 56 cents per gallon (cpg). By mid-July, the market was trading in the high 30s cpg to low 40s cpg range. Propane fell to 71.5 cpg, from 87.5 cpg. Butane was at 93.75 cpg, down from 112.75 cpg. Natural gasoline fell to 119.5 cpg, compared with 144.5 cpg in mid-June.
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