Summer temperatures are rising across North America — and commodity resin prices are doing the same.
Average per-pound selling prices for polyethylene and polypropylene in the region each are up since June 1, according to several buyers contacted recently by Plastics News. All grades of PE are up an average of 3 cents, while PP prices have catapulted up an average of 9 cents. Average per-pound prices for solid polystyrene also have zoomed up 7 cents since May 1.
PE prices have increased an average of 13 cents per pound — or 22 percent on dairy blow molding grades of high density PE — since January. Prices had plummeted 45 percent in the second half of 2008 as consumer demand and feedstock prices both tumbled.
Buyers and market watchers attributed the PE hike to market tightness caused by export sales. Crude oil prices also are up recently, but most North American PE is based on natural gas, where prices have been more stable.
“Feedstocks, right now, are having nothing to do with the [PE] price,” said Mike Burns, a PE market analyst with Resin Technology Inc., a consulting firm in Fort Worth, Texas. Recent PE price increases “have all been driven by exports, but now [exports] are starting to taper off, so we might be at the top of the [PE] market.”
First-quarter U.S./Canadian demand was not encouraging for PE makers. Regional sales of HDPE fell 15 percent vs. the year-ago period, with low density PE sales down 14 percent and linear LDPE sales slipping 9 percent, according to the American Chemistry Council in Arlington, Va. But, in a month-to-month comparison, several buyers said demand improved slightly from April to May to June 2009.
But this year's price increases — as well as an 8-cent move announced for July 1 that later was changed to 4 cents for July 1 and 4 cents for Aug. 1 — have not sat well with many PE buyers, including Jeff Vogel, purchasing director at injection molder Blackhawk Molding Co. Inc. in Addison, Ill.
Vogel, whose firm primarily buys LDPE, said the increases of 2009 “haven't been justified.”
“If you look at oil and gas ratios, there's no reason prices should have gone up,” he said. “A lot of processors still haven't recovered from the 20 months of increases or flat prices in 2007 and 2008.
“But it's not like Wal-Mart not having something, so you go to Target. In a lot of cases, there are only so many companies making these materials.”
The big PP move took many buyers by surprise and was linked to an identical move on prices of propylene monomer feedstock.
Propylene supplies have tightened, as higher gasoline prices and the current driving season have made it more profitable to send propylene into the gasoline market, where it's used as a fuel additive.
Regional PP prices have jumped 21 cents per pound — about 38 percent — since Jan. 1, after falling 35 percent in the second half of 2008.
North American PP makers now have an additional 6-cent increase on the table for July 1. The success of that increase is likely to be tied again to gasoline, since true PP demand remains poor, with North American demand falling 12 percent in the first quarter of 2009, according to ACC.
“May [PP] demand was pretty good, but that might have been because of buyers buying ahead of an increase,” a PP buyer in the Midwest said. “Overall demand is still off quite a bit.”
In PS, producers have won price increases totaling 7 cents per pound since May 1. In most cases, buyers saw 4 cents in May and have seen an additional 3 cents since June 1.
For the year, solid PS prices now are up 12 cents per pound — an average of about 18 percent for injection molding grades of high-impact PS.
The PS hikes can be chalked up to an improving price market for benzene feedstock, which is used to make styrene monomer. Benzene prices settled at $2.34 per gallon in June — an increase of 45 percent vs. the March price. Pricing pressure is expected to remain strong on benzene during July, which could provide some backing for a 5-cent PS price hike announced for July 1.
First-quarter U.S./Canadian PS demand remained soft, down 15 percent vs. the year-ago period, according to ACC.