North American polypropylene prices have shot up again since April 1, while average selling prices for polycarbonate, nylon 6 and nylon 6/6 in the region are up substantially since Jan. 1 as well.
The PP increase for April is 7 cents per pound, bringing the total amount of increases taking hold this year to 22 cents, according to buyers and market watchers contacted by Plastics News.
The most recent hike, as with previous ones, was tied to tight supplies of propylene feedstock. But with propylene supplies improving, and export demand plummeting, a number of players think PP prices could be heading the other way pretty soon.
PP producers “are getting worried, because domestic demand for April is forecast to be disastrous,” a PP buyer in the Midwest said. “Buyers are feeling that prices can go down, so they're running their [PP] inventories down.”
“This is it,” market analyst Scott Newell said of the recent wave of PP price increases. “As soon as [producers] brought prices up, people reduced their buying.
“And [North American producers] have been priced out of the export market for most of the year,” said Newell, who is with Resin Technology Inc. in Fort Worth, Texas.
Statistics compiled by the Arlington, Va.-based American Chemistry Council for the first two months of 2010 would seem to bear this out. North American PP sales were flat for the two-month period, as a boost of more than 5 percent in domestic sales was negated by a drop of almost 40 percent in exports. That's a stark turnaround from full-year 2009, when PP exports soared more than 50 percent.
Another PP market-watcher said higher PP prices in 2010 have led some processors to consider a switch to lower-priced high density polyethylene in “simple applications where there's not a big cost to switch.”
But even if the PP market does see a bit of a correction in these next few months, Newell said that rough seas may lie ahead. That's because lower-priced natural gas feedstock is likely to remain as a source of propylene — and natural gas produces less propylene than crude oil does.
“The fundamentals in [propylene] monomer that brought us here are still in place,” he said.
In polycarbonate, prices have ticked up an average of 8 cents per pound since Jan. 1, as propylene, benzene and phenol feedstocks each have been in short supply at various times in the first part of the year.
Prices increases for optical media grades of PC may be even higher, since Bayer Corp. experienced a two-week production outage for that material in March at its plant in Baytown, Texas, sources said. Dow Chemical Co. also confirmed it had a two-week phenol shutdown at its plant in Oyster Creek, Texas, earlier this year.
Regional PC makers have followed up with massive increases announced for May 1. Bayer is seeking a 25-cent jump on that date, with Sabic Innovative Plastics US LLC going for a 23-cent hike.
“The problem is that polycarbonate makers have lost a significant amount of margin in the last year,” said Greg Smith, a PC market analyst with RTI. “Prices went down last year as well, before they came back up a little bit. Demand should be better this year, but margins are still a lot worse now than where they've been historically.”
The nylon sector has been impacted by feedstock issues that have sent average selling prices for nylon 6/6 resin up 20 cents per pound since Jan. 1, with prices for nylon 6/6 absorbing an even larger hike of 20 cents.
Nylon 6/6 makers that use propylene in their production process have been affected by tightness in that material, said market analyst Mark Kallman at RTI. For nylon 6, supplies of caprolactam feedstock have been impacted by increased exports of that material to Asian markets, Kallman said.
Additional increases for both nylon 6 and 6/6 could work their way through North America during the second quarter of 2010, he added.
Regional sales of both nylon 6 and 6/6 — and of PC as well — should be helped by increased automotive production in both North America and Asia, sources said.
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