Prices for polyethylene and polypropylene are traveling divergent roads through the North American market in early 2006.
According to buyers contacted recently by Plastics News, average selling prices for PE have dropped 4 cents per pound since Feb. 1, while average PP prices have climbed 4 cents in the same time period. For PE, prices now are down a total of 12 cents since Dec. 1, after seeing a 32 cent post-hurricane runup in late 2005.
The PP upsurge reverses a combined drop of 9 cents that took place in December and January. Major PP makers have another 9 cents in increases on the table through March.
Soft demand has influenced both markets in early 2005. A major Midwestern PP processor said demand at his firm in the first two months of the year was flat with the year-ago period. A PE market watcher in Texas said demand for that material ``hasn't been all that good.''
But soft PE demand was coupled with slumping prices for natural-gas feedstock to send that market down once again in February. Natural gas - the feedstock used to make 70 percent of North American PE - was priced near $15.50 per million Btu in December, but since then has slid to $7.40, as of Feb. 21. As a result, prices for PE feedstock ethylene monomer also have been weak.
This combination has taken the wind out of the sails of PE makers, who have been unable to stop prices from falling even though a sizable chunk of North American ethylene capacity has been down for repairs. With those plants coming back onstream in coming months - along with Nova Chemicals Corp. restarting PE production at its Sarnia, Ontario, site - a number of PE buyers don't expect to see upward pricing pressure any time soon.
In PP, the pricing turnaround was the result of dwindling propylene supplies - as refineries used lighter feedstock ethane, which was lower-priced but produces less propylene monomer.
That situation has cut into profit margins for PP producers, leading one buyer to compare PP with the low-profit polystyrene market.