By: Frank Esposito
June 28, 2012
AKRON, OHIO (June 28, 2:50 p.m. ET) — The slippery slide of the commodity world sent average North American prices for several resins down once again in June.
Since June 1, average prices for all grades of polyethylene in the region have fallen 7 cents per pound, while average polypropylene prices have plummeted 15 cents per pound. In that same time frame, average prices for suspension PVC and PET bottle resin each are down 5 cents per pound, according to buyers and market sources contacted by Plastics News.
Prices for each of those materials had slipped in May as well. Early-year price gains now have been erased for all of them.
Sources and market watchers cited declining feedstock costs and lethargic consumer demand as reasons for the second straight month of price declines.
The PE move was the second 7-cent drop in as many months. “Ethane and ethylene [feedstocks] are falling, but they may have hit bottom,” said Mike Burns, a PE market analyst With Resin Technology Inc. in Fort Worth, Texas. “If prices stay the same in July, they could be flat for August as well.”
U.S./Canadian demand has not done much to support market pricing. Through April, regional high density PE sales were down almost four percent, with low density PE sales down about 5 percent and linear low density PE sales off just over 6 percent, according to the American Chemistry Council in Washington.
PE buyers “now are just buying as needed,” Burns added. “They’ve got no incentive to buy more, because prices are decreasing.”
Burns also said that he doubted that lower prices could do much to help North American PE makers to sell their materials elsewhere, since PE from other global regions now are competing for that same business as well. Through April, U.S./Canadian PE exports were down almost 24 percent, with LLDPE exports down 19 percent and LDPE exports slipping more than 5 percent.
The latest PP drop is another in a series of dizzying moves to befall that market in the last two years. Regional prices had climbed 22 cents per pound in the first four months of 2012, but now have zoomed down 25 cents since May.
PP pricing “is a case of live by the sword, die by the sword,” said Phil Karig, owner of the Mathelin Bay Associates LLC consulting firm in St. Louis. “Or, more specifically, polypropylene prices following oil prices up, then following them down and then starting the cycle all over again.”
Crude oil prices were near $78.50 in early trading June 28. Prices for that key feedstock have slipped almost 14 percent in the last month – and are way off of their $100-plus highs reached earlier this year.
But Karig added that PP buyers “shouldn't get too comfortable with the latest [price] drop…because the pricing roller coaster will start climbing again as soon as oil prices blip up again.”
Through April, North American PP demand basically was flat, according to ACC, with a 2 percent domestic sales gain being wiped out by a plunge of almost 32 percent in export sales.
PVC prices fell 5 cents in June after slipping down 2 in May. U.S./Canadian sales were surprisingly strong – up 4 percent through April – in spite of the sales drop. Domestic PVC sales were up 9 percent in that period, indicating that the region’s construction market – PVC’s main end market – may be recovering.
One PVC market watcher said that the big unknown for the market moving forward is whether buyers in its dominant pipe end market are holding resin orders as they wait for prices to come down further, or if they’ve already completed some of their usual summer work because of mild winter weather seen in much of the U.S.
In PET, prices now have slid for three consecutive months, although the 5-cent June drop is larger than the combined 4-cent drop of April and May. Lackluster demand for carbonated soft drinks – PET’s biggest end market – was cited as a reason for the decline, as more consumers move toward healthier options such as bottled water, sports drinks or juices.
Contract prices for paraxylene feedstock fell in June, and prices for ethylene glycol feedstock were expected to fall as well, one industry contact said. “Demand [for PET] is still very soft,” he added. “A lot depends on crude oil at this point.”
Through June, regional PE prices now are down an average of 9 percent, according to the Plastics News resin pricing chart. In that same period, PET prices are down 5 percent and prices of PP and PVC each are down 3 percent.