The resin pricing roller coaster is on the way up again, with North American prices for all grades of polyethylene and polypropylene rising in recent weeks.
Average per-pound selling prices for high density, low density and linear low density PE each are up 7 cents, while PP has jumped 6 cents, according to buyers and market contacts reached by Plastics News. The changes are reported on this week's PN resin pricing chart.
The PE move is the culmination of a hike that PE makers had been seeking since Jan. 1. Soft demand spread across many markets made the hike challenging for PE makers, which are seeking to improve margins after prices collapsed in the second half of 2008.
PE producers continue to lobby for an additional 5 cent-per-pound move that was to take effect Feb. 1. In spite of the successful 7 cent move, regional demand has remained soft in early 2009, according to Mike Burns, a market analyst with Resin Technology Inc. in Fort Worth, Texas.
PE processors still aren't buying anything more than what they need, Burns said. There was some price-based buying in December and January, but that wasn't based on true demand.
Burns added that although the fate of the 5 cent increase remains undecided, he does not expect prices to erode in the early going of 2009.
U.S. operating rates for HDPE finished 2008 around 70 percent, but could climb close to 75 percent in the first quarter of 2009, according to some market watchers. Dow Chemical Co. will tighten regional PE demand somewhat in late March when it closes a plant in Freeport, Texas, with 225 million pounds of annual capacity.
The drumbeat of desultory financial news continued for PE makers Feb. 18, when Westlake Chemical Corp. of Houston reported that its olefins unit posted a fourth-quarter operating loss of $136 million and an operating loss of $40 million for full-year 2008. Westlake's olefins/PE sales volume in pounds fell almost 17 percent during the fourth quarter, and was down almost 13 percent for the year.
In PP, producers were able to tack on 6 cents in February after getting 3 cents the month before, buyers said. Propylene monomer feedstock prices have climbed and PP supplies have tightened, as several companies have removed capacity.
But more PP capacity reductions may be on the horizon, according to RTI market analyst Scott Newell.
If North American demand stays at the rate it was in the second half of 2008, the market is still oversupplied, Newell said. If that's the case, there's still too much capacity out there and it's very possible that we'll see more [resin] shutdowns.
Newell added that he believes regional PP makers will wait to see how the economy shakes out in 2009 before making decisions on such shutdowns.
Similar to HDPE, U.S. PP operating rates fell close to 70 percent in the fourth quarter of 2008, but could rebound above 75 percent in the first quarter of 2009, according to market watchers.
Through November, North American PP sales for 2008 were on track to finish the year right around 17 billion pounds, according to the American Chemistry Council in Arlington, Va. If that pattern holds, 2008 would be the worst year for regional PP demand since 2002, when full-year sales came in at just under 17.1 billion pounds.
Fueled by export growth, regional PP demand totaled a record 19.3 billion pounds in 2007.