It's true that what goes up must come down but the North American polypropylene market is taking things to the extreme this year.
Just one month after prices shot up an average of 12 cents per pound, they've plunged an average of 10 cents per pound since Oct. 1, according to several buyers contacted recently by Plastics News.
It's really difficult to talk to your customers about price changes when your raw material costs are moving around like this, a PP buyer based in the Southeast said.
The big month-to-month price swing also was affected by a market change that now has polymer-grade propylene monomer used to make PP tracking prices for refinery-grade propylene, instead of tracking ethylene monomer as it's done in years past.
Polymer-grade [propylene] hasn't tracked refinery-grade since April or May, said Kathy Hall, executive editor of the PetroChem Wire pricing newsletter in West Orange, N.J. There was a huge drop in refinery-grade in late September. It felt like a correction, because propylene is so tied into gasoline and other economic factors.
With the summer driving season at an end, less propylene has been needed as a gas additive, resulting in more of it being available for PP production. A petrochemical cracker jointly operated by BASF Corp. and Total Petrochemicals USA Inc. in Port Arthur, Texas, also has resumed production, further increasing propylene supply, Hall added.
Sales of PP into the export market also have declined in recent months a fact that hasn't gone unnoticed by propylene traders.
These markets are traded on a daily basis, and traders can sense when demand is beginning to disappear, Hall said.
Even with the 10-cent October drop, regional PP prices are up an average of 28 cents per pound since Jan. 1 a run-up of 50 percent, based on the Plastics News resin pricing chart.
The increases have had no basis in North American PP demand, which was down 4 percent through August, according to the American Chemistry Council in Arlington, Va. Subtracting export growth of 67 percent leaves the domestic PP market with a demand drop of almost 11 percent.
One of the few PP growth areas through August was injection molded cups and containers, with North American sales into that segment up almost 14 percent. By comparison, sales into injection molded caps and closures another sizable PP area were down 12 percent.
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