Soft domestic demand and flat export sales drove average selling prices for polyethylene and polypropylene down again in May.
Sellers and industry sources contacted recently said PE prices fell an average of 4 cents per pound during the month, while PP prices slipped an average of 3 cents. Selling prices for both materials had dropped 2 cents per pound in April.
Producers ``thought demand from China would kick in, but it hasn't,'' a Texas-based PE buyer said.
A PP buyer based in the Chicago area added that resin makers ``had been running hard'' in anticipation of demand that did not materialize.
U.S./Canadian sales of high density PE basically were flat in the first quarter when compared to a year ago, according to the American Plastics Council in Arlington, Va. In the same period, linear low density PE sales were up 4 percent and low density PE sales dropped about 3 percent.
Export sales were a mixed bag in that period. LLDPE exports jumped almost 28 percent, but LDPE exports dropped 7 percent and HDPE exports plunged almost 18 percent. The LLDPE export gain essentially canceled out the HDPE/LDPE drops, leaving overall first-quarter PE exports down less than 1 percent.
In PP, overall first-quarter sales were down about 3 percent, with export sales roughly flat, according to APC. Exports accounted for about 14 percent of first-quarter PE sales and about 11 percent of first-quarter PP sales.
Industry analyst Robert Bauman said the Chinese situation is somewhat complicated, in that increased use of scrap and recycled products has lowered demand for virgin resin, even though overall resin demand from the region's processors hasn't dropped.
``The sourcing has changed,'' said Bauman, who's with Nexant Inc., a consulting firm in Houston.
``China has cornered the market on scrap. But that level of supply can't be maintained, so June could be the last month where North America is affected,'' he said.
At the same time, new polyolefin capacity is coming onstream in China that could allow the country to meet more of its needs internally, Bauman added.
In a recent research report, Banc of America Securities analyst Kevin McCarthy stated that ``higher PE inventories, tepid demand and consequent price weakness have weighed on PE margins.''
McCarthy added that excess pounds in the PE market appear to be resulting in ``a competitive pricing environment.'' PP also has been affected by rapidly dropping prices for propylene monomer feedstock, he said.
Prices for blow molding grades of HDPE for dairy uses now are down about 7 percent since January, according to the Plastics News resin pricing chart. Prices for that material had soared almost 40 percent in 2004.
In PP, producers now have given back all of the early-year price increases they had won, leaving prices unchanged since January, according to the PN chart. Prices of general-purpose, injection molding grades of homopolymer PP had skyrocketed almost 60 percent in 2004.
Some PE/PP end markets showed growth in spite of first-quarter softness. Sales of LDPE into nonfood packaging film were up 6 percent, according to APC, while sales of LLDPE into rotomolding also were up 6 percent. HDPE sales into injection molded pails were up 13 percent in the first quarter, and sales of PP into sheet applications were up 6 percent.