HOUSTON (April 14, 10 a.m. EDT) — Polypropylene's versatility and low-cost feedstocks have been its saving grace in tough times — and that trend should run into 2003 and beyond.
Although profit margins were under siege in the 2000-02 period, demand growth stayed strong, as PP successfully battled high density polyethylene and polystyrene in consumer goods, packaging and other markets.
“There's been a lot of new growth in intermaterial substitution,” said Bob May, North American PP business director for BP Corp. of Naperville, Ill. “The versatility of polypropylene in [consumer goods and packaging] makes it a really nice fit, especially when you look at its low cost per cubic pound compared to other materials.”
More PP gains have come at the expense of HDPE, since the resins have similar processing shrinkages, May said. Some gains have been made against PS, but that material has more of a shrinkage differential vs. PP, he added.
Bob Dennett, a consultant with Chemical Market Associates Inc. in Houston, agreed that PP has made significant inroads against HDPE, particularly in injection molding applications. PP also has registered sizable gains in the auto market, where it's positioned itself to be the key polymer, Dennett said at his firm's World Petrochemical Conference, held March 26-27 in Houston.
Short-term tightness could continue in the North American PP market, as demand is expected to grow at about 6 percent annually and shutdowns of 1.3 billion pounds of excess capacity in 2001-02 have constrained supply. Supplies of feedstock propylene monomer also are tight.
“We're not on sales allocation for polypropylene, but at the same time our customers haven't been able to build inventory,” BP's May said. “Our own inventories are about 35 days now, and we normally like to be around 40.”
A key factor in PP's ongoing success will be availability of propylene at an affordable price when compared to HDPE feedstock ethylene, CMAI's Dennett said. This affordability could be challenged by propylene's higher growth rate vs. ethylene.
North American PP makers gained 6 cents per pound in January and February. A similar increase in March is likely; another 5-8 cents per pound in increases is on the table for April and May.