By: Frank Esposito
May 1, 2014
North American prices for polypropylene and PET bottle resin each ticked down another penny per pound in April.
The PP drop follows similar 1 cent declines in February and March. The April decline came as a bit of a surprise, although some buyers and market watchers said it was the result of pre-buying from PP users who were concerned about weather affecting the material’s availability earlier in 2014.
A PP buyer in the Midwest U.S. said that lower-priced propylene feedstock also played a role in the April slide. The buyer added that prices in May could be flat or down another penny at most.
The April drop — as well as the previous two declines — came even as North American PP sales grew almost 4 percent in the first quarter of 2014, according to the American Chemistry Council in Washington. A domestic sales gain of just over 2 percent was boosted by a surge of almost 72 percent in PP exports.
PP sales for the month of March alone were up just over 9 percent, according to ACC, with domestic sales up 8 percent and export sales up almost 43 percent. For the quarter, North American sales of PP into sheet applications soared almost 31 percent, with sales of the material to distributors up almost 27 percent.
Prior to the series of three 1-cent drops, regional PP prices had jumped 5 cents per pound in January. With 8 cents of price volatility in the first four months of the year, the 2014 PP market so far has been much less volatile than that of 2013, when 27 cents of volatility was seen in the first three months of the year alone.
Global PP leader LyondellBasell Industries posted mixed results in the Americas for the first quarter of 2014. The firm’s sales of olefins and polyolefins — including PP — in the region grew more than 3 percent vs. the year-ago quarter to more than $3.2 billion. But pretax profit for those materials in the region fell 18 percent to $736 million, with officials citing cold weather and maintenance activity as reasons for the decline.
The pretax profit slide also was affected by LyondellBasell’s ethylene purchases in advance of reduced production at its production site in La Porte, Texas, before 800 million pounds of ethylene capacity are added there later this year.
Even with that overall drop, LyondellBasell officials said their PP results in the region improved by $30 million during the quarter, as company sales volumes grew 9 percent.
The 1-cent April drop for PET means that the material has opened 2014 with four consecutive monthly price declines. Prices now have seen 1 cent drops in January, March and April, along with a 2 cent drop in February.
The drops have come even as U.S./Canadian PET production is believed to have fallen slightly in the first quarter of 2014 vs. the year-ago quarter. Industry operating rates for the region were believed to be just less than 80 percent for the quarter, up slightly vs. the same quarter in 2013.
The regional PET market continues to struggle with lower demand from carbonated soft drinks, its largest end market. Bottled water growth also has slowed somewhat, and many PET bottles in general are much thinner and, as a result, use less resin per bottle than they did just a few years ago.
With the regional PET market already oversupplied and with the demand picture soft at best, market watchers were surprised in late March when Cooper River Partners LLC — a land development firm in Charleston, S.C. — filed a request with the U.S. Army Corps of Engineers to fill more than 10 acres of wetlands there in order to build a PET resin complex with almost 1 billion pounds of annual capacity.
Local media reports did not identify the PET maker involved with the project, but they said the process used would involve sugarcane instead of fossil fuel-based feedstocks.
DAK Americas LLC already makes PET in the area at its Cooper River plant. That site had made polyester fibers and added PET production in 2003. Market watchers have estimated that the North American PET market already is oversupplied by at least 1 billion pounds.
Even so, large North American PET expansions are planned by Indorama Ventures Public Co. Ltd. and M&G Group. Indorama plans to build a new plant with 1.2 billion pounds of annual capacity in Decatur, Ala., with an opening date of late 2015. M&G intends to build a massive new PET plant in Corpus Christi, Texas. That plant — with 2.2 billion pounds of annual capacity — is expected to open sometime in 2016.