North American prices fall for polyethylene, polypropylene and PVC

By Frank Esposito
Senior Staff Reporter

Published: May 24, 2012 6:00 am ET

Related to this story

Topics Materials, Suppliers

AKRON, OHIO (May 24, 3:30 p.m. ET) — An uncertain demand picture and increasing feedstock supplies have combined to drive down North American prices for polyethylene, polypropylene and PVC resin since May 1.

Regional PE prices are down an average of 7 cents per pound, while PP prices have tumbled 10 cents and PVC prices have taken a 2-cent dip, according to buyers and market watchers contacted recently by Plastics News.

Increased supplies of ethylene and propylene in the region — a result of the return of some petrochemical plants that had been down for maintenance — played a role in the price drops.

“It’s like you just added 15 percent more ethylene into a soft market,” one PE buyer in the southern U.S. said.

“We’re looking at a surplus of ethylene by mid-June,” said David Barry, a plastics market analyst with the PetroChem Wire consulting firm in West Orange, N.J. “The whole ethylene fleet is going to be back online.”

Regional PE prices had climbed an average of 6 cents per pound in the first four months of the year. Returning supplies, however, sent ethylene prices tumbling, especially on the spot market, wiping out all of that previous gain. At the macro-economic level, lower crude oil prices also affected PE, even though most PE in the region is derived from natural gas.

PE demand in the region also tapered off, as buyers had bought ahead and were working off inventories. Soft demand failed to prop up existing price levels.

“Feedstocks are part of it, but the weak economy is the bigger piece,” the buyer in the southern U.S. said. “There’s a lot of [PE] material available and demand is very weak.”

First-quarter totals from the American Chemistry Council illustrate this demand picture, with sales of linear low density PE down 2 percent, high density PE down 3 percent and LDPE down almost 4 percent.

In HDPE, a major 24 percent drop in export sales wiped out a 2 percent domestic sales gain. A similar pattern occurred in LLDPE, where a 19 percent export drop erased a domestic gain of almost 4 percent. In LDPE, an export sales drop of 6 percent worsened a 3 percent domestic decline.

“With lower polyethylene costs overseas enabled by lower crude oil prices, North American PE producers have seen their export markets start to dry up, their inventories start to build and their formerly healthy margins start to be squeezed,” said Phil Karig, managing director with the Mathelin Bay Associates LLC consulting firm in St. Louis.

“The run-up [in PE prices] that we saw earlier in the year happened because producers had lost margin and wanted to raise prices to get it back,” added Mike Burns, a market analyst with Resin Technology Inc. in Fort Worth, Texas. “Now [PE buyers] don’t need more material.”

Another market watcher said that regional PE buyers “have been carping about the huge margins producers had been making, based on the low price of [natural gas-based] ethane.”

Market insiders said that another PE price drop is possible in June, although such a drop might be smaller than the 7-cent downtick in May.

“This might not be a good demand year for polyethylene,” said Robert Bauman, owner of the Polymer Consulting International Inc. consulting firm in Spring, Texas. “It’s a combination of feedstock supply and the economy still being pretty poor. Unemployment at 8 percent is still bad.”

The 10-cent plunge that PP took in May is yet another sign of that market’s extreme volatility. It marks the eighth time in the last two years that the North American PP market has seen a double-digit increase or decrease in a single month.

“There’s too much [propylene monomer] supply available,” PetroChem Wire’s Barry said. “Refinery’s are running at good rates now, and polypropylene demand has taken a hit.”

“[PP] sales are low,” he added. “You’re seeing people sit out of the market right now because prices are so high.”

PP sales in the U.S. and Canada were up 2.5 percent in the first quarter, according to ACC. Domestic sales were up more than five percent, but overall growth was weakened by a dizzying plunge of 34 percent in export sales.

“With a little bit of price relief on monomer, polypropylene producers have additional leeway to rollback some of the sharp PP increases from earlier in the year, and maybe claw back a little bit of the resin sales market share they lost, if only temporarily,” said Karig at Mathelin Bay.

The apparent increase in domestic PP demand also could have been a result of processors buying ahead of additional increases, rather than an actual increase in organic demand, PCI’s Bauman added.

“Sometimes people get sales mixed up with demand,” he said.

Regional PP prices had soared up an average of 22 cents per pound since January. Even with the 10-cent drop in May, prices in the region remain, on average, almost 14 percent higher than they were at the start of the year.

Market watchers said an additional PP price decrease is possible in June, erasing even more of the earlier increases.

The 2-cent drop in PVC prices came as a bit of a surprise, since that material’s fortunes appeared to be trending up in recent months. Prices had increased a total of 4 cents per pound in February and March as the region’s housing market improved. PVC generates more than 60 percent of its sales from the building and construction market.

But the drop in ethylene prices and increased ethylene availability proved to be too much, taking away half of the February-March gain. Even with the 2-cent drop, prices remain more than 5 percent higher than they were at the start of the year.

U.S./Canadian PVC sales were up 5 percent in the first quarter, with an 8 percent drop in exports softening a 13 percent gain in domestic sales. In March, U.S. housing starts were 7 percent ahead of their 2011 pace.


Comments

North American prices fall for polyethylene, polypropylene and PVC

By Frank Esposito
Senior Staff Reporter

Published: May 24, 2012 6:00 am ET

Post Your Comments


Back to story


More stories

Image

Oxford Polymers adds compounding capacity

January 30, 2015 1:16 pm ET

Materials maker Oxford Polymers has increased its compounding capacity by installing a new single-screw extrusion line.    More

Image

Marval's next generation expands capacity

January 30, 2015 1:27 pm ET

MAMARONECK, N.Y. — There’s a lot of history at Marval Industries Inc., but the 59-year-old compounding firm also is looking toward the...    More

Image

Yizumi's stock price shoots up

January 30, 2015 11:56 am ET

Chinese injection press maker Guangdong Yizumi Precision Machinery Co. Ltd. has seen its stock price more than double in the first five trading days...    More

Image

Lubrizol buys Brazil-based coatings technology manufacturer

January 30, 2015 11:50 am ET

Specialty chemicals company Lubrizol Corp. of Wickliffe, Ohio, said it has acquired a Brazilian company that makes coatings technology for products...    More

Image

China to lead the way on robots

January 30, 2015 11:12 am ET

More industrial robots will be operating in China’s production plants than in the European Union or North America by 2017.    More

Market Reports

Plastics in Automotive: Innovation & Emerging Trends

This special report newly released by PN and sponsored by The Conair Group examines current trends in the use of plastics in automotive, materials innovations and the changing landscape. It includes a review of legislative/regulatory activity impacting vehicle development and lightweighting, market opportunities & challenges for mold and toolmakers, innovative design strategies being implemented by major OEMs and suppliers, as well as a review of key indicators in Canada, Mexico, Brazil and China.

Learn more

Plastics Recycling Trends in North America

This report is a review and analysis of the North American Plastics Recycling Industry, including key trends and statistics based on 2013 performance. We examine market environment factors, regulatory issues, industry challenges, key drivers and emerging trends in post-consumer and post-industrial recycling.

Learn more

Injection Molding Market Analysis & Processor Rankings

Plastics News BUNDLED package contains our in-depth Market Analysis of the Injection Molding segment. You will gain keen insight on current trends and our economic outlook.

As a BONUS this includes PN's updated 2014 database of North American Injection Molders RANKED by sales volume. Sort, merge, mail & prospect by end market, materials processed, region, # of plants and more.

Learn more

Upcoming Plastics News Events

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

June 2, 2015 - June 3, 2015Plastics Financial Summit - Chicago 2015

September 16, 2015 - September 18, 2015Plastics Caps & Closures - September 2015

More Events