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Material Insights: Bad weather helps push up PE prices

A list of things that will never end includes the Winter of 2014 and volatility in resin pricing. Those topics merged in February as bad weather helped push through a 4-cent-per-pound price hike on all grades of polyethylene in North America.

Published: March 3, 2014 2:06 pm ET
Updated: March 3, 2014 3:05 pm ET

A list of things that will never end includes the Winter of 2014 and volatility in resin pricing. Those topics merged in February as bad weather helped push through a 4-cent-per-pound price hike on all grades of polyethylene in North America.

PE supplies tightened as ExxonMobil Chemical Co. announced sales allocation after experiencing production problems at plants in Texas, and Louisiana. Ineos Group and LyondellBasell also declared force majeure for polyethylene as a result of weather-related issues.

The 4-cent hike ended a four-month period of flat pricing for polyethylene. That's a rare situation — since 2000, we've only seen four stretches of three months or more when polyethylene prices were flat, and two of them have been in the past 18 months. Market watchers chalk this up to producer discipline combined with relatively growth in PE demand.

It's worth noting that producer discipline in controlling inventories has played a role in preventing PE prices from dropping. The North American market has not seen a price decrease since late 2012.

What's next for polyethylene? Well, some PE plants are running at near capacity right now, and suppliers are seeking increases of 6 cents per pound for March 1.

Polypropylene prices fall

Meanwhile, the North American polypropylene market dodged weather issues last month. That, combined with lower demand and lower feedstock costs, sent prices down an average of 1 cent per pound. That drop came on the heels big increases in December in January, when prices spiked up 9 cents per pound.

Market watchers cited speculation and pre-buying in advance of announced increases as reasons for the earlier price hikes.

Styrolution closing a PS plant

Elsewhere last week, the North American polystyrene market will shrink when Styrolution closes its Indian Orchard, Massachusetts, plant by the end of the year. Styrolution will move some production to its plant in Decatur, Ala.

Indian Orchard is one of Styrolution's oldest and smallest polystyrene plants. It employs 58 and has annual capacity of 330 million pounds. Monsanto first opened the plant in the 1970s.

Frankurt, Germany-based Styrolution now will convert a polystyrene line in Decatur over to production of NAS-brand specialty styrenic resin by the end of the year. The firm also is in the process of adding NAS production at its plant in Ludwigshafen, Germany.

Styrolution blamed slow demand for polystyrene, especially in North America. The outlook for PS is flat, and the company's four North American plants were operating at a capacity utilization rate in the low 70s, which wasn't sustainable for the long term.

North American polystyrene demand grew about 1 percent in 2013, according to the American Chemistry Council.

West Virginia needs infrastructure

In shale gas developments last week, a new study found that a potential new ethane cracker in West Virginia could yield billions of dollars for the regional economy, but it will require a commitment to developing infrastructure that the region currently lacks.

The study, by former West Virginia University professor Tom Witt, also explored the potential of a new cracker to attract downstream investments, like new film, sheet and injection molding plants. Witt said the project has the potential to rejuvenate West Virginia's chemical and manufacturing sector.

He added that the although the region's industrial base offers a variety of skill sets, more development is needed to ensure the availability of an adequate skilled workforce for a growing petrochemical industry.

Witt presented his findings to the state legislature's natural gas caucus Feb. 25.

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