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Material Insights: Volatility still plagues PP pricing

Processors like to complain about volatile resin prices. But polypropylene prices were on a roller coaster throughout 2013, and they finished the year with a 4 cent-per-pound increase. Find out why in this edition of Material Insights.

Published: January 13, 2014 3:58 pm ET
Updated: January 13, 2014 4:04 pm ET

Processors like to complain about volatile resin prices. But polypropylene prices were on a roller coaster throughout 2013, and they finished the year with a 4 cent-per-pound increase. Find out why in this edition of Material Insights.

A December surge in prices of North American polypropylene resin brought that material back to almost the exact same spot it was at the start of 2013. The 4-cent December hike meant that prices at the end of the year were only a net of 2 cents lower from where they were on Jan. 1, 2013. But the year also included a total of 37 cents in increases and decreases, once again making PP the region’s most volatile commodity resin.

The 4-cent December move once again tracked the price of propylene monomer feedstock. That material has been in tight supply as shale-based natural gas has supplanted crude oil as a feedstock for petrochemicals in many applications. Natural gas produces less propylene than crude oil does, but lower gas prices have given it the edge for more than a year.

The increase comes at the end of what was a lackluster year for overall North American polypropylene demand. Overall sales were down 1.5 percent, according to the American Chemistry Council. Although domestic sales were flat, sales into the export market tumbled almost 33 percent.

There were some bright spots in the domestic market. Sales of polypropylene into injection molded housewares were up almost 10 percent, while domestic sales into sheet applications were up almost 11 percent, according to ACC. Those totals are for the first 11 months of 2013.

Market analyst Phil Karig said 2014 will be another year for fluctuating polypropylene prices. He compared polypropylene to a volatile Wall Street stock, saying that the PP market isn’t for the faint of heart. Karig is managing director of Mathelin Bay Associates.

 A pair of compounding leaders based in northeast Ohio also was busy last week. Avon Lake-based PolyOne continued to realign the assets it acquired when it bought Spartech in early 2013. PolyOne will close a former Spartech office in Washington, Pa., in a move that will eliminate about 20 jobs.

Administrative work formerly done in Washington now will be handled from Seabrook, Texas. PolyOne also will move former Spartech plants in Ramos, Mexico, and Lockport, N.Y. under PolyOne’s Producer Services banner. That unit provides toll compounding for customers and is part of PolyOne’s performance products and solutions business.

These moves come about six months after PolyOne announced it would close six former Spartech plants by the end of 2014.

PolyOne Chairman, President and CEO Stephen Newlin says PolyOne remains extremely pleased with the Spartech acquisition. He added that PolyOne continues to see upside opportunities to expand its portfolio of offerings and better serve its customers.

Elsewhere in Northeast Ohio, Fairlawn-based A. Schulman announced its ninth acquisition in less than five years. This time, Schulman is paying $15.1 million for Prime Colorants Inc., a maker of custom color and additive concentrates based in Franklin, Tenn.

Chairman, President and CEO Joseph Gingo said Prime Colorants fits into Schulman’s strategy to grow its custom color capabilities in the United States, as well as further transform its U.S. operations from commodity products to a business focused on niche products and services.

Prime employs about 50 at a 60,000-square-foot plant in Franklin. The firm had annual sales of about $12 million in 2013, primarily into the automotive and construction markets. In addition to pelletized and powder color materials, Prime will provide Schulman with an entry into the liquid color market, officials said.

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