As unrelenting as an ocean tide, North American prices for polyethylene and polypropylene have gone up yet again since May 1.
Record-high prices for crude oil and natural gas again were the drivers in the price hikes. All grades of high density, low density and linear low density PE are up an average of 3 cents per pound since May 1, while PP prices are up an average of 4 cents during the same period, according to several buyers contacted recently.
Crude oil topped $133 per barrel May 21 up from $85 in late January and natural gas was close to $12 per million British thermal units May 22 up from $8 per million in early February. Natural gas is used to make a majority of North American PE, but prices for that material have been tracking crude oil for more than a year.
The impact on prices for commodity grades of PE and PP has been considerable. On blow molding grades of HDPE, prices are up 30 percent in the past 12 months, according to the Plastics News resin pricing chart. On copolymer PP for injection molding, prices have zoomed up 23 percent in that same period.
``Resin demand isn't driving anything, but with oil and gas going the way they're going, the resin companies aren't going to back off,'' an Illinois-based PE buyer said.
``The bottom line is that feedstocks are very high and inventories are still below normal levels,'' said Mike Burns, a PE market analyst with Resin Technology Inc. in Fort Worth, Texas. ``Eventually, there's going to have to be a price increase at the end-use level.''
In the first two months of 2008, U.S./Canadian LLDPE sales roughly were flat, while LDPE sales were down 6 percent and HDPE sales were down 3 percent, according to the American Chemistry Council in Arlington, Va. A bright spot came in the form of LLDPE sales into the food packaging market, which were up almost 10 percent in the two-month period. Food packaging accounted for about 13 percent of domestic LLDPE sales in that time span.
In PP, cost push ``is the biggest driver,'' according to Esteban Sagel, a PP market analyst with Chemical Market Associates Inc. in Houston.
``Domestic demand hasn't been very good, and it might not improve much during the rest of the year,'' Sagel said. ``But resin makers are in a difficult position because there's been less propylene monomer [feedstock] available.''
North American PP sales were down 5 percent in January-February, according to ACC. Export sales which greatly helped regional PP makers in 2007 fell 10 percent in those two months. Regional PP sales into the film market representing 10 percent of the domestic total climbed almost 8 percent.
North American PP capacity will be affected later this year when market leader LyondellBasell Industries shuts down 280 million pounds of capacity at a plant in Morris, Ill. That move comes after the firm took out 825 million pounds of capacity by closing a pair of Canadian plants in 2007.
But the market will regain that capacity and a little more by the end of 2009 as LyondellBasell plans to restart a 500 million pound-capacity line in Texas and open an 800 million pound-capacity expansion in Mexico.
Houston-based LyondellBasell which now ranks as the world's largest polyolefins maker posted first quarter polymers sales of $4.7 billion and operating income of $212 million, even as its global PP production fell 3 percent to 2.8 billion pounds.
Polymers mostly PE and PP as well as some specialty resins accounted for 36 percent of first-quarter sales for LyondellBasell, making it the largest of the firm's four units. LyondellBasell formed last year when Basell Holding BV paid $19 billion for Lyondell Chemical Co. The firm ranks as the largest PP maker globally and in North America, and holds the No. 2 spot in North American HDPE and LDPE.
Major PE makers now are seeking increases of 5 cents per pound for June 1, while PP makers will try for increases ranging between 5 and 7 cents per pound on June 1 as well.