PP prices jump 6 cents in Feb.

By Frank Esposito
Senior Staff Reporter

Published: February 28, 2013 4:22 pm ET
Updated: February 28, 2013 4:28 pm ET

Related to this story

Topics Resin Pricing, Polypropylene, Materials Suppliers

AKRON, OHIO — March Madness may be right around the corner, but January and February weren't exactly calm for North American buyers of polypropylene resin.

Regional PP prices jumped another 6 cents per pound in February, right on the heels of a 15-cent hike in January. The increase means that prices in the region are up about 22 percent since Jan. 1, according to the Plastics News resin pricing chart. That percentage is based on general-purpose grades of homopolymer PP used in injection molding.

Availability of propylene feedstock again was the culprit behind the price hike, industry sources said.

"It's the same thing as in January," said Scott Newell, a PP market analyst with Resin Technology Inc. in Fort Worth, Texas. "There's tightness in propylene. These are some of the seasonal outages we see this time of year. With heavy outages at crackers, [PP] inventories don't affect pricing as much."

Most of these outages are from planned maintenance turnarounds, but a few unplanned outages have made the propylene market even tighter than normal.

At the same time, propylene is suffering from some structural issues caused by increased North American use of natural gas-based ethane as a petrochemical feedstock, market veteran Robert Bauman said. Ethane produces less propylene when cracked than crude oil-based naphtha does — and major development of natural gas fields in the region has favored ethane, thus diminishing propylene supply.

Propylene makers that can use either ethane or naphtha as a feedstock now are using almost 90 percent ethane, said Bauman, president of Polymer Consulting International Inc. in Spring, Texas. Just a few years ago, those same producers were using only 70 percent ethane, he added.

Ethane is advantaged vs. naphtha when the ratio of oil prices to natural gas prices is more than 6-to-1. As of Feb. 28 — with oil at $92.50 per barrel and natural gas at $3.50 per trillion cubic feet — that ratio was more than 26-to-1.

"The propylene market is structurally short because of the way shale gas ethane has impacted the business," Bauman said.

Dow Chemical and other firms — most recently Ascend Performance Materials — have announced plans for on-purpose propylene production, but the soonest any major propylene capacity increase could impact the North American market is 2015, sources said.

And while North American PP makers might be catching flak for the high rate of price increases, former PP executive Craig Blizzard said that producers' profit margins aren't increasing along with prices.

"Producers are exerting their position of market power in light of cracker shutdowns late in the first quarter," said Blizzard, who's now president of Blizzard Consulting Group in Chevy Chase, Md. "But the margins on polypropylene over propylene are not crazily high."

Even as prices have soared 21 cents in the first two months of the year, buyers contacted by Plastics News said that prices could drop as much as 5-10 cents per pound in March, and another decrease might be seen in April. Spot prices for propylene already were dropping in late February.

Newell, Bauman and Blizzard all agreed that the price volatility and overall high prices seen in North American PP in recent years is having an adverse effect on the market. The January move was the eighth double-digit price swing to hit the North American PP market since Jan. 2011. And the 2012 PP total of 16.5 billion pounds sold in the U.S. and Canada is more than 14 percent below the pre-recession total of 19.3 billion pounds. Last year, sales were up less than 1 percent vs. 2011.

"We see demand in polypropylene as stagnant to declining," Newell said. "It never really had a rebound from the recession. There was a little bit of improvement, but sales were down in 2011 and flat in 2012."

As for the recent increases, Newell said that 21 cents in two months "definitely creates a demand response." PP buyers "will cut back now or cancel orders or push back shipping dates. That's not good for the industry."

Blizzard added that the PP industry "as a whole realizes that polypropylene isn't returning to the 2x GDP growth level it enjoyed for many years." He also cited several factors that have reduced North American PP use, including processors finding ways to use less PP in their products, a reduction in the consumption of low cost PP products, an increase in imported PP products and a reduction in sales of North American PP into export markets.

And while some market watchers contend that most processors who might be thinking of switching from PP to another material already have done so, Bauman said there might be more losses ahead for PP. He estimates that between 2011 and 2013, North American PP will lose 12 percent of its demand to high density polyethylene and polystyrene.

"Processors may be able to change machinery" in order to use lower-priced and less-volatile HDPE and PS, he explained.


Comments

PP prices jump 6 cents in Feb.

By Frank Esposito
Senior Staff Reporter

Published: February 28, 2013 4:22 pm ET
Updated: February 28, 2013 4:28 pm ET

Post Your Comments


Back to story


More stories

Image

Molder provides quality parts and quality work for disabled adults

July 23, 2014 2:40 pm ET

Coarc Manufacturing Inc. does injection molding, assembly and all of the work of traditional manufacturer, but it also serves as part of Coarc Inc. a ...    More

Image

Asia to remain chemical giant but US shale will bring competition

July 23, 2014 1:00 pm ET

A new IHS Chemical report on global spending for chemical production predicts capacity additions will peak in 2014 at $120 billion and then will...    More

Image

DuPont quarterly sales drop, income rises

July 23, 2014 12:46 pm ET

DuPont Co.'s sales and net income experienced slight changes for the second quarter 2014, as operating earnings dropped to $1.17 per share in the...    More

Image

Celanese to expand production in Brazil

July 23, 2014 11:15 am ET

Celanese Corp., the Irving, Texas-based chemicals and specialty materials company, has announced that it will expand its manufacturing capabilities...    More

Image

Plastics help designers bring home the gold

July 22, 2014 2:15 pm ET

Products with polymer content received multiple gold recognitions in the 2014 International Design Excellence Awards.    More

Market Reports

Injection Molders Market Report & Ranking 2014

This special package contains our 132-page 2014 Market Report on the Injection Molding segment and our exclusive 2014 RANKINGS database of 500+ Injection Molders for a discounted package price.

Learn more

Plastics Recycling Market Review & Outlook 2014

This special report from Plastics News examines the North American plastics recycling industry and provides insight into indicators that impact market viability, including Resin pricing trends for virgin and recycled market material and historical Resin production trends for post- consumer and industrial waste.

Learn more

Shale Gas Market - Analysis of North American Region

This report highlights the impact of shale-based natural gas on the North American plastics market and features an in-depth analysis of production trends in the United States during 2013 and a forecast for 2014 and beyond.

Learn more

Upcoming Plastics News Events

September 10, 2014 - September 12, 2014Plastics Caps & Closures 2014

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

More Events