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Information in this section is supplied courtesy of www.ThePlasticsExchange.com, a company based in Chicago that operates an online spot market and provides market intelligence on commodity plastic resins. Prices are in U.S. funds. ThePlasticsExchange.com Market Update 7/14/2008
Polyethylene Volume: Below Average Price: Higher / Steady
After starting the third quarter with a quick $.04/lb jump during the first week of July, spot Polyethylene prices stalled this past week. This pause seems to be a direct result of last week’s dip in spot Ethylene prices as steam cracker production issues were largely resolved as we moved into July. While overall domestic Polyethylene producer offerings remained limited this past week, after taking $.11/lb of increases during the second quarter, keen buyers eye the monomer price reprieve as a sign of potential downstream weakness. This has putting to question the viability of the $.07/lb price increase floated for July Polyethylene contracts.
Spot LLDPE Butene - Spot Ethylene - Spread 1 Year	Polyethylene 1 Year
While eager spot buying at the expense of contract purchases during the second quarter might have masked some downstream domestic demand destruction, export sales continue to provide excellent alternative outlets for fresh resin production. This has kept producer inventories well under control and some are still just coming out of allocation measures this month. So while it does not appear that Polyethylene prices can fall away in the short term, further price increase will be challenged if the cost-push need is not there to support the increases which are currently $.15/lb including $.08/lb nominated for August. Even with the second quarter run up in Ethylene monomer costs, North American Polyethylene producers continue to enjoy a cost advantage relative to other regional producers. This open arbitrage has encouraged brisk internal buying interest seen from key markets including South America, Europe and Asia. Demand from Asia has been strong, largely attributed to pre-Olympic monomer production diversion to gasoline products and plastics products stocking. Steep resin contract price increases in Europe, mirroring a rise in their Ethylene prices, have also brought strong buying from traders in that region. This export demand could keep US supply snug for the rest of the summer, especially as many European contracts are still quarterly. While some question the longevity of Asian demand after the Olympics, typical seasonal buying might then arise into pre-(end of the year) holiday processing. Inventory decisions made in June could also play a part in July spot market activity. If a market top is sensed to be near, traders emerge and offer the market down and processors could then choose to work off inventories, rather than build or maintain current levels. The key may very be Ethylene contract settlements (NTP – Net Transaction Price). Regardless of spot Ethylene trends, an increase in July Ethylene contracts will cause resin producers to push at least part of their $.07/lb increase very hard, which could inspire processors to return to the spot market and try to beat their contract price.
Polypropylene Volume: Average Price: Rising
The Polypropylene market is in a different boat than the Polyethylene market. The familiar concerns of demand destruction and margin loss intensified this week as Polymer Grade propylene contract agreements began to be heard for July at levels steeper than $.08/lb, the lower end of the range of Resin increases offered. Resin contract prices will surely rise, but the question now is by how much. Some Resin producers have issued increases for as much as $.18/lb to insure margin preservation.
Spot HoPP - Spot RGP - Spread 1 Year	Polypropylene 1 Year
Producer offerings have been light for much of the year so far, owing to continued operating rate cutbacks. Traders and processors have been the main participants in the spot market, and are expected to be so again in July. With the Monomer contract news this week, and Refinery Grade Propylene trading ever higher, even the Polypropylene traders paused this week to check their offer levels. Offers above $.90/lb seen earlier this month were considered to be too priced by some processors, but they were nonetheless snapped up by others. These prices seem very competitive now in light of the likelihood that Monomer prices will settle well above $.80/lb in July. The skeptics in the Resin market will likely wait for August price increases to be issued to Monomer contracts before returning, but they could find resin above $1.00/lb by that time. International interest has been lukewarm for Polypropylene for some months, and higher spot prices are expected to keep it tepid. But Propylene costs all over the world are soaring, and traders from Asia and Europe are carefully monitoring the US market. Warehoused resin inventories will continue to provide the most competitive offers, and a buying frenzy could ensue as the month progresses. On the domestic front, the concern for demand destruction remains intense, as more downstream production is rationalized and credit lines become pinched by these record-high prices. With this cost-driven market, though, only a severe cutoff of processor demand could begin to back up the chain. In the meanwhile, the spot market is expected to become brisk as every penny matters to more and more participants.
Polystyrene Volume: Low Price: Steady / Higher
Spot Polystyrene activity remained slow this past week as few buyers chased limited offerings. HIPS prices gained a penny this week, while GPPS price slipped a penny, with the deviation due to continued producer efforts to recover higher Butadiene costs utilized in HIPS production. The sentiment behind July price increases became more bullish as Benzene spiked along with Crude Oil.
Polystyrene 30 Day	Polystyrene 1 Year
Spot Benzene prices have resumed their upward trek, rallying hard this past week - now closing in on $4.50/gal according to the PetroChem Wire. Producers, pressured by these rising costs, are now seeking to increase July Polystyrene contracts by $.03/lb for GPPS and $.04/lb for HIPS. Polystyrene supply is expected to remain fundamentally challenged as a result of consolidation among US producers. Railcars of good color material are flat-out hard to come by; however, there has been some well priced offspec material offered to the market. With Generic Prime producer offerings absent in the market, resellers have offered inventories, some piercing the $1/lb level.
Michael Greenberg, CEO The Plastics Exchange (312) 202-0002
Michael Greenberg, CEO The Plastics Exchange (312) 202-0002 Check out The Plastics Exchange before your buy or sell! We have live markets and prices on prime and widespec commodity grade resin in truckloads and railcars, and quality and delivery are guaranteed by our fully integrated credit and logistics - click here to register. We also have access to a wide range of wide-spec resin as well as foreign prime resin for international trade. Call us at (800) 850-2380 or send an email and we'll source the resin for you. If you are already a member, many thanks for your continued support. If not, join today! To make purchases, fax us your credit info at (312) 202-0174 or apply online at www.ThePlasticsExchange.com. Disclaimer: The information and data in this report is gathered from exchange observations as well as interactions with producers, distributors, brokers, and processors. These sources are considered reliable. The accuracy and completeness of this information is not guaranteed. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Our market updates are compiled with integrity and we hope that you find them of value. Chart values reflect our asking prices of generic prime railcars delivered USA.