By: Frank Esposito
January 17, 2013
AKRON, OHIO -- A major price hike has hit the North American polypropylene market, sending prices up an average of 15 cents per pound since Jan. 1.
Average selling prices in the region for polystyrene also are up 3 cents per pound since Nov. 1, while suspension PVC prices in the region have dropped 1 cent per pound since Dec. 1.
The 15-cent PP increase is shown on this week's Plastics News resin pricing chart, along with a 1-cent increase for that material that occurred in December. The net change on the PN chart is an upward move of 16 cents.
The January move is the eighth double-digit price swing to hit the North American PP market since January 2011. Increased volatility has been a concern of both buyers and producers of the material.
The recent increase again was tied in to a major fluctuation in the price of propylene monomer feedstock. Propylene supplies have grown tight because of a number of planed and unplanned outages in production throughout the U.S. Gulf Coast, including a lengthy shutdown at a plant operated by Petrologistics LLC in the Houston area.
"This [increase] is all supply-related," said Scott Newell, a PP market analyst with Resin Technology Inc. in Fort Worth, Texas. "And we're now moving into the season of planned outages."
Tighter regional PP inventories also are allowing producers to gain pricing power, Newell added, pointing out that PP inventories at the processor level fell more than 200 million pounds during 2012.
An industry source said price increases of as much as 5-10 percent could be on the way in February, as supplies of both PP and propylene monomer are expected to remain tight.
Through October, U.S./Canadian PP sales were up just over 3 percent in 2012, according to the American Chemistry Council in Washington. Domestic sales growth of just over 4 percent was dampened by a 15 percent drop in export sales. Among major PP end markets, injection molded cups and containers led the way with growth of almost 23 percent.
PS prices climbed an average of 3 cents per pound in November, and producers now are working to implement a similar increase in January. The regional PS market has been rocked by sky-high prices for benzene feedstock, which topped $5 per gallon for the first time in January, with contract prices settling at $5.16. Benzene prices now are up almost 23 percent since September.
Spot benzene prices, however, were falling in mid-January, causing some buyers to doubt if the full 3 cents would stick.
"As expected, a majority of confirmed [benzene] transactions in December were above $5 per gallon, but we have yet to see if surpassing the contract benchmark of $5 has an impact on the products, traders and consumers," market analyst Jose Flores wrote in a recent research note.
"There may be some pushback at first, but we anticipate that market participants will adjust accordingly and move forward," added Flores, who is with Plaza Group in Houston. "Previous buzz in the marketplace questioned if $4 benzene could be sustainable."
North American PS demand through October had been lackluster, dropping almost 3 percent. Demand was roughly flat, however, in food packaging/food service — the largest PS end use, generating almost 60 percent of domestic sales.
"Demand for PS has been soft, so the only justification for the November increase was increased feedstock costs," RTi market analyst Greg Smith wrote in an email.
In PVC, the 1-cent drop came in December, with construction activity slowing for winter. Prior to the drop, regional PVC prices had been up about 3 percent during 2012.
The year also was good for PVC on the demand side, with U.S./Canadian sales up more than 6 percent through October. Domestic PVC sales climbed more than 8 percent in that 10-month period, with export sales up almost 3 percent.
"PVC sales are benefiting from a housing market that is showing good year-over-year growth, [and from] the start of the primary construction season for PVC pipe and siding being just around the corner and strong PVC export opportunities," market analyst Phil Karig wrote in an -mail.
"With all of these things going for them, PVC producers should be in the driver's seat until construction starts to slow down in the fall," added Karig, who is chairman of Mathelin Bay Associates consulting firm in St. Louis.
And in the PE market, producers and buyers are battling over a 5-cent increase attempt that was scheduled for Jan. 1. Outages also could play a role there, according to Karig.
"Export demand has been reasonably good for PE and producer resin inventories are low, but the main driver of PP and PE pricing right now is the large number of refineries that are currently experiencing production disruptions," he wrote. "The greater-than-anticipated number of outages, and the fact that they were multiple and sudden, has hardened producer resolve on the 5-cent Januasry PE increase and caused some buyers to scramble to get ahead of the second PE increase [4 cent] on the table for February by buying even more resin."
He added that such a tactic, however, "while potentially favorable for an individual processor that can stock resin in advance of a price increase, only serves to make it more likely that the increase will actually occur on schedule."
During 2012, PE prices, based on dairy blow molding grades of high density PE, were down 5 percent, according to the PN pricing chart.