By: Frank Esposito
November 3, 2011
AKRON, OHIO (Updated Nov. 3, 3:30 p.m. ET) — Commodity resin prices are tumbling throughout North America, with polypropylene experiencing the steepest drop — a 14-cent dive since Oct. 1.
Regional prices for polyethylene, PVC, polystyrene and ABS also are down in recent weeks, according to buyers contacted by Plastics News. Drops in demand and in raw material prices were connected to all of these declines.
The PP swoon ends a two-month period in which prices were flat. Prices for the material had tumbled a total of 19 cents per pound in June and July. That drop came after the market was besieged by a total of 37 cents in increases from January through May.
The October decline means 34 of the 37 cents in increases have disappeared — and it reinforces the PP market’s reputation for extreme volatility.
North American PP demand has been soft for most of the year, and that weakness finally caught up with prices for propylene monomer feedstock, according to PP buyers contacted by Plastics News. Ongoing economic uncertainty caused sales of PP into areas such as consumer products — including furniture and housewares — to be down 10 percent through August, according to the American Chemistry Council in Washington.
Overall, North American PP sales were down almost 7 percent through August, with a 17 percent drop in exports worsening a drop of 6 percent in domestic sales. Buyers said an additional PP price drop in November is a strong possibility as the market moves into the traditionally slower fourth quarter.
The picture in the North American PE market is more blurry. After two flat months — and with demand slack at best — some buyers originally reported a 3-cent drop for October. That amount later changed to 5 cents, due in part to a report from a widely followed third-party pricing index.
Prior to the 3-to-5 change, a PE buyer in Texas said suppliers “are up in arms and viciously trying not to let the market go down the 5.” The Texas buyer added that PE makers were trying not only to stem the tide, but to reverse course and push through a 5-cent increase for November.
This tension was evident in an Oct. 24 letter to customers from PE maker Ineos Olefins & Polymers USA.
“We are aware that some third-party consultants have estimated the price to go down more than 3 cents per pound in October,” officials wrote. “We do not see this as representative of what is actually occurring in the market, and is an attempt to make the market as opposed to report on actual settlements.”
But the 5-cent drop eventually held, with buyers saying that PE makers Nova, ExxonMobil, Westlake, Formosa and Chevron Phillips all confirming the 5 around the same time.
Mike Burns, a PE market analyst with Resin Technology Inc. in Fort Worth, Texas, said the North American PE field was oversupplied in September and October, especially with demand checking in as average or weak.
“There was too much resin available at a low cost to produce,” he said.
Burns added that PE makers’ profit margins are tightening at a time when inventories are high, which should create a November market that he described as “interesting.”
U.S./Canadian PE demand has muddled its way through 2011. HDPE sales were up more than 1 percent through August, according to ACC, while sales of LDPE and LLDPE in that time frame were basically flat. For all three grades, drops in export sales damaged positive domestic growth rates.
PE price volatility for 2011 has been less extreme than that seen in PP. Prices climbed an average of 11 cents per pound – about a 14 percent increase based on dairy blow molding grades of HDPE - through April before falling an average of three cents in June and sliding another three in July.
Regional PVC prices slipped an average of 2 cents per pound in September and have ticked down another 2 cents since Oct. 1, according to buyers. Lower feedstock costs and slowing export growth played a role in the declines. The construction-led domestic PVC market remains weak — with sales off by almost 4 percent through August, according to ACC — but exports are up almost 26 percent.
Export sales made up about 36 percent of U.S./Canadian PVC sales through August, according to ACC. That’s up from 30 percent in the same period last year.
In solid and expanded PS, the 6-cent downtick occurred as demand slowed and prices for benzene – used to make styrene monomer feedstock – fell almost 17 percent in October to close at $3.33 per gallon. Another PS price decline for November is possible, as benzene already has closed down five percent to $3.15 per gallon for the month.
Lower prices for butadiene also played a role in lessening high-impact PS prices, according to RTI market analyst Stacy Shelly. Regional butadiene prices had peaked around $1.80 per pound earlier this year, but recently settled around $1.20, he said.
Regional selling prices for commodity ABS grades also were affected by lower demand and lower benzene and butadiene prices. Shelly said that lower-priced ABS resin from Asia now is making its way to North America, placing more downward pressure on pricing.
ABS prices had climbed about 20 percent between mid-2010 and mid-2011. Lower benzene prices for November also could increase the chances of more price drops, buyers said.