The North American polyethylene and polypropylene markets are starting off 2010 with successful price increases.
Regional PE prices are up an average of 4 cents per pound since Jan. 1, while regional PP prices have increased an average of 3 cents per pound, according to buyers contacted recently by Plastics News. These changes are shown on this week's PN resin pricing chart.
For PE makers, the increases were a long time coming. Increase attempts failed in November and December after meeting stiff resistance from buyers. Lackluster late-year demand also prevented the earlier attempts from taking hold.
But further increases in price for ethylene feedstock, as well as tightness caused by unseasonably cold temperatures in Texas and other factors helped turn the PE tide. Increased exports especially in December also affected PE availability.
The [PE] market has gotten fairly tight, a buyer in the Southeast said. We really haven't seen [resin availability] improve much since December.
December was a record month for North American PE exports, as more than 30 percent of the region's total PE production was exported. Lower prices for natural gas-based PE which makes up a majority of North American PE production is making the region's output more affordable than crude oil-based PE, produced in most other regions of the world.
Prior to 2008, the North American PE market had exported about 17 percent of its output every year. But in 2008, that percentage jumped to the mid-20s, and in 2009 was in the 25-27 percent range, according to Mike Burns, a PE market analyst with Resin Technology Inc. in Fort Worth, Texas.
As long as oil is up and there's demand around the world, North America will continue to export, Burns said. Exports have filled the void that North American demand left open.
Ethylene feedstock supplies also are playing a role, both because of the Texas cold snap and other unexpected issues. LyondellBasell Industries AF SCA and Chevron Phillips Chemical Co. LLC are among ethylene suppliers with some production currently off-line, sources said.
Ethylene is ignoring energy to a large extent, said Kathy Hall, executive editor of PetroChem Wire pricing newsletter in West Orange, N.J. It's more supply and demand-related right now.
On the PE side, sources reported recent production problems or maintenance turnarounds at a Chevron Phillips plant in Orange, Texas, and at a Dow Chemical Co. plant in Fort Saskatchewan, Alberta.
U.S./Canadian PE demand remained soft through the first 10 months of 2009, especially when export sales are factored out. HDPE's 2 percent overall sales loss includes an 8 percent domestic loss and a 23 percent export gain, according to the American Chemistry Council in Arlington, Va. In linear low density PE, a flat sales number covers a 4 percent domestic loss and a 16 percent export gain.
Exports were not as helpful for LDPE, where a 9 percent overall loss included a 9 percent domestic loss and a 10 percent export loss in the first 10 months of 2009.
For full-year 2009, North American PE prices increased an average of 21 cents per pound, according to the PN chart. PE makers now are seeking a total of 8 cents split between two rounds of increases for Feb. 1.
In PP, resin prices continued to match monomer increases, as they did for much of 2009. The 3-cent increase on top of an eye-popping 38 cents in 2009 increases is moving PP perilously close to being displaced by other materials such as HDPE or even paperboard in some packaging applications, sources said.
Demand really hasn't improved that much, said a buyer based in the Midwest. And the high prices are causing [PP] export opportunities to decrease. Prices are going to start working to their detriment instead of to their favor.
Increases have been prompted by an ongoing situation where lower-priced ethane [natural gas] feedstock is being used to source propylene, even though it produces less propylene than higher-priced naphtha [crude oil] feedstock does. The resulting tightness in propylene supplies has allowed PP buyers to raise prices, even though North American PP sales were down 3 percent in the first 10 months of 2009.
The PP drop includes a 10 percent drop in domestic sales and an incredible gain of 71 percent in exports.
In polyethylene, it's a question of what you're willing to pay, said Hall at PetroChem Wire.
But in polypropylene, it's a question of finding material.
PP supply also has been affected by force majeure conditions that are limiting production at a LyondellBasell plant in Lake Charles, La., sources said. Moving ahead, regional PP makers now are seeking increases of 5 cents per pound for Feb. 1.
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