It might be hard for North American plastics processors to believe, but the region's commodity resin prices really aren't that bad. Especially when compared with the rest of the world.
As a result, U.S./Canadian resin exports skyrocketed in the first quarter of 2007, according to a report from the American Chemistry Council in Arlington, Va. The surge was most clear in polypropylene - where first-quarter exports nearly doubled - and in high density polyethylene, where producers shipped out 85 percent more material than they did in the same period last year.
Healthy export gains also were reported in low density PE (up 30 percent), PVC (30 percent), linear LDPE (27 percent) and polystyrene (12 percent).
The export wave boosted low-single-digit domestic growth rates for HDPE, LLDPE and PP. In LDPE, export growth swung a domestic sales drop of 1 percent into an overall gain for the quarter. Exports also softened domestic sales losses for PVC and PS.
Market watchers said North American commodity plastic makers should enjoy the export boom while it lasts, because it might prove to be short-lived.
``We don't see any long-term competitive advantage to North American resins,'' said Jignesh Shah, a market analyst with Chemical Market Resources Inc. in Houston. ``There's nothing sustainable in this [export] growth. There might be if [the region] was making different, unique resins that could only be made here, but [commodities] aren't unique materials.''
Industry veteran Nick Vafiadis described the export situation as ``a bit of an aberration'' that was directly related to North American prices that were ``uncharacteristically low'' vs. other global markets.
``The regional price delta has already begun to narrow and North American exports should decline accordingly,'' said Vafiadis, who serves as polyolefins business director with Houston's Chemical Market Associates Inc. consulting firm. ``That said, we expect North American exports to trend above historic averages in 2007.''
Consultants at both CMAI and CMR have said they expect North America eventually to become a net importer of PE and PP. In recent public appearances, officials with PP leader Basell Polyolefins have agreed with this expectation, while officials with PE and PS maker Nova Chemicals Corp. - including President and Chief Executive Officer Jeff Lipton - have disputed it.
Lipton expanded on the topic May 30 at an investment conference in Toronto.
``Everybody in North America is exporting,'' Lipton said at the event, which was sponsored by Toronto investment firm Scotia Capital. ``Excluding hurricane-related supply outages, imports have stayed between 1 and 1.5 percent of domestic demand over the last six years. Exports have averaged 18 percent of domestic demand. They were over 20 percent today and appear to be getting stronger.''
At Dow Chemical Co. - a major producer of PE and other commodity resins - Howard Ungerleider said low North American resin prices ``have caused a significant reduction in imports of resin and of finished products like film, bags and parts into North America.''
``This same issue has also caused a significant increase in resin exports out of North America,'' said Ungerleider, who serves as commercial vice president of North American plastics for Midland, Mich.-based Dow. ``Pricing for PE resins in Europe and Asia continues to strengthen due to robust demand, coupled with rising feedstock cost and some supply outages.''
Export strength has served to keep North American supplies tight, which then has allowed producers to raise prices on most commodity materials. Since late January, average selling prices for all three major types of PE are up 14-17 percent, according to the Plastics News resin pricing chart. Average PS prices have climbed 11 percent, PP is up about 10 percent and PVC has ticked up 5 percent.
In the first quarter, exports had the greatest impact in LDPE and LLDPE, accounting for between 20 percent and 22 percent of total sales for each material. Exports generated almost 17 percent of first-quarter HDPE sales and between 6 percent and 9 percent of sales of PP, PVC and PS during the period.
