North American prices for polyethylene and polypropylene have boomeranged back from early-year setbacks since May 1.
Average selling prices for PP and high density PE are up 3 cents per pound, while prices for low and linear low density PE each have gained 6 cents per pound, according to several buyers contacted recently.
Buyers said the PE moves are tied closely to supply and demand, with processors drawing their inventories way down as prices fell 20 cents per pound between December and April. That slide followed a 32 cent post-hurricane advance in late 2005.
Processors ``don't even have safety inventories right now,'' a PE buyer in the Chicago area said. ``After the situation with the storms, they built up a little bit of material, and that's what they've been running on. Nobody was buying more material than they needed.''
The Chicago-area buyer estimates many PE processors now are running with less than 10 days of inventory. The same buyer also echoed other buyers in stating that underlying North American PE demand seemed weak in the early months of 2006, even though it has picked up somewhat in April and May.
In the first quarter of 2006, U.S./Canadian LLDPE sales were down almost 2 percent, according to the American Plastics Council in Arlington, Va. Regional sales of LDPE were down more than 1 percent in the same period, while HDPE sales were roughly flat.
Resin makers ``had been hoping for a post-hurricane recovery or a seasonal bounce [to improve demand], but there's been a lot of uncertainty in the economy,'' said Pat Duke, a market analyst with DeWitt & Co. Inc. in Houston.
``As a result, they started dumping material, but now they're below reinvestment levels and have to get prices up,'' Duke said.
He added that the market also was spurred to hold the line on price increases by the drop in first-quarter plastics sales reported by market leader Dow Chemical Co.
Midland, Mich.-based Dow saw pretax profit in its basic plastics unit - including PE, PP and polystyrene - tumble more than 40 percent to $476 million, even though sales were flat at $2.8 billion.
The story was similar at PE makers Westlake Chemical Corp., Nova Chemicals Inc. and Equistar Chemicals LP. PE-related operating income fell 5 percent in the first quarter for Westlake of Houston, while profit in similar areas was down almost 40 percent at Pittsburgh-based Nova and almost 20 percent at Houston-based Equistar.
First-quarter PE sales volume in pounds was down 2 percent for Nova, while per-pound sales of PE and related products dropped 10 percent at Westlake and were flat at Equistar.
Moving forward, major HDPE makers are seeking another 10 cents in a pair of increases May 31 and June 1, while makers of LDPE and LLDPE will try for 7 cents June 1.
In PP, buyers said the 3 cent hike - a penny shy of what PP makers had been seeking - was more closely tied to higher prices for propylene monomer feedstock than to any basic supply and demand issues.
PP makers ``are in a bad place right now,'' a Pennsylvania-based PP buyer said. ``So they're saying `take it or leave it,' even though demand has been a little bit slower than they expected.''
Increased gasoline profit also has made suppliers less willing to produce propylene for nongas markets, industry sources said. As a result, propylene supplies have tightened, driving prices for the monomer up almost 3 cents per pound.
PP prices ``are totally dependent on monomer right now,'' a Midwestern PP buyer said. ``Demand has almost nothing to do with it.''
First-quarter PP sales in the U.S. and Canada were up just more than 2 percent, according to APC, with sales into the domestic market up almost 3 percent. The gain was fueled by a jump of almost 4 percent of PP sales into injection molded rigid packaging. That increase included rises of almost 9 percent of sales into caps and closures and of almost 7 percent of sales into cups and containers.
PP makers now are seeking increases of 6 cents per pound for June 1.
