North American selling prices for polyethylene and polypropylene are barking in the dog days of August.
Prices for both materials have climbed since Aug. 1, according to buyers and sellers contacted recently. All grades of high, low and linear low density PE are up an average of 5 cents per pound, while PP has climbed an average of 2 cents per pound.
PE makers had been seeking 7 cents, while PP makers had been trying for 4 cents. Some buyers reported paying the full amounts, but the consensus was with the lower price levels. PE prices now have climbed an average of 11 cents per pound since May 1, with PP prices up an average of 9 cents per pound in that same period.
PE demand has rebounded to a greater extent than PP. PE also is coming under greater feedstock pressure, as a result of tightness in supplies of ethylene feedstock. Fueled by a strong sales month in May, U.S./Canadian LLDPE sales were up 7 percent in the first five months of 2006 compared with the same period in 2005, according to the American Plastics Council in Arlington, Va.
Regional HDPE sales were up 6 percent and LDPE sales were up 5 percent in the same comparison, while PP sales lagged slightly, showing a 3 percent gain.
After bottoming out under $5.50 per million Btu in mid-July, prices for natural gas feedstock shot past $9 in late July and early August before receding to the $7.50 range.
Prices for ethane and ethylene also are up, but industry consultant Robert Bauman said recent upward pricing on both PE and PP have been centered around a tightening balance of supply and demand.
``Operating rates are high, and we don't expect to see any relief in energy prices for the rest of 2006 and on into 2007,'' said Bauman, who is with Nexant Inc. in Houston. ``The supply-demand balance indicates that the [resin] industry is headed for a fly-up with increases in demand and pricing.''
Bauman added that continued high PP prices might affect material replacement strategies. Processors that had switched containers or packages into lower-priced PP in recent years could return to such materials as polystyrene and PET in 2007, he said.
Ethylene tightness can be traced in part to an ongoing capacity outage of 1.8 billion pounds at Huntsman Corp.'s complex in Port Arthur, Texas. That site is expected to be fully operational by early 2007.
Increased recent resin buying may include some restocking in advance of the approaching hurricane season. Last fall's storms knocked out a great deal of resin-making capacity.
But one California-based PE buyer questioned the wisdom of a pre-buying move.
``We've heard of some cases where people are trying to buy an extra rail car [of resin], but in an extended outage, that's not going to do you a whole lot of good,'' he said. ``It's almost like they're doing it just to make themselves feel better in case something happens.''
And even as PE and PP buyers warded off full increases in August, several said they expected to see prices rise to some extent in September as well.
``There was no way [PE makers] were getting 7 cents in August,'' a Chicago-based PE/PP buyer said. ``But if demand holds up and the market stays tight, they'll probably get some [increase] in September.''
Markets posting strong sales gains through May included nonfood packaging film (LLDPE sales up 12 percent), pipe & conduit (HDPE sales up 28 percent), nonpackaging film (LDPE sales up 18 percent) and injection molded cups and containers (PP sales up 20 percent).