July 2012

In June, Polyethylene saw a $0.07 cpp drop in pricing to match the decline in May.  As we pointed out in March, this time frame was likely the bottom for PE.  The combined $0.14 cpp move down over the two months saw all of the $0.11 cpp increases for the year come out of the market, plus a few pennies.

July pricing did not continue to fall however, and now we are facing $0.05 cpp increase for both August and September in PE.

Availability in both PE and PP dried up as we progressed through July. Spot pricing actually increased during the month for many grades of PE and PP. There have been several HDPE plant outages which have tightened the availability of blow molding specifically. Also, homopolymers are being described as snug in PP. Any excess inventory was sold off at quarter-end, capturing sizeable margins considering the cost to produce monomers. Given the weakening global economy, it was also the prudent move to make. Now the US faces low availability, rising costs to make PE and price increases ahead.

While buyers have been adjusting to lower prices, the cost to make both PE and PP are on the rise. To quickly refresh the bounce we start with chemical feeds. Ethane has rebounded to $0.36 cpg, but had been as high as $0.42 cpg. The price today is still a 25% rise from the bottom. Propane, which has been plagued by very high inventory levels, also managed to move up 10%. Ethylene has risen back to $0.49 cpp representing a 22% move up. Propylene, the one product that is typically the most volatile, has settled in at $0.52 cpp. Crude is up 13% from the bottom in late June and Natural Gas continues to soar by moving up 42% since June. The current Midwest heat wave, curtailed supply and more conversions to using the gas have lifted the product abruptly. (read full article)