North American polypropylene resin prices tumbled again in June, following propylene monomer prices on the way to an average decline of 8 cents per pound.
Regional PP prices now have dropped an average of 20 cents per pound since May 1, for an average decline of almost 18 percent. Prior to the decreases, prices for PP in the region had climbed an average of 22 cents per pound in the first four months of the year.
“Pricing had gotten too high to start with,” a PP buyer in the Midwest said. “It had to come back down.”
Crude oil-based naphtha has been used more as a propylene feedstock in recent months, sources said. That's increased the supply of propylene monomer available to make propylene, since naphtha yields more propylene than natural gas-based ethane does.
Increased use of ethane as a feedstock earlier in the year had helped to tighten propylene supplies, which in turn sent PP prices up.
Propylene supplies could increase further later this year when pipeline operator PetroLogistics re-starts a former ExxonMobil Corp. plant in the Houston area. That plant will have 1.2 billion pounds of annual propylene capacity, a portion of which will be used for PP production.
PP market analyst Scott Newell recently said domestic demand in North America was “pretty encouraging” in the first four months of the year. Newell — who is with Resin Technology Inc. in Fort Worth, Texas — also said the regional PP market “has excess capacity, but isn't oversupplied.”
North American PP makers have idled almost 3 billion pounds of annual capacity since 2008. Newell put regional market demand at 16.6 billion on annual capacity of about 20 billion.
Looking ahead, buyers and sellers contacted recently by Plastics News said they expect regional PP prices to stabilize in July and August, without additional large drops in price.
In the first four months of 2010, North American PP sales essentially were flat vs. the year-ago period at about 5.5 billion pounds, according to the American Chemistry Council in Arlington, Va.
Domestic market growth of 10 percent was negated by a 54 percent drop in export sales. The domestic growth total benefited from being compared to a very weak start in 2009, when the market was reeling from a global economic slowdown.
Regional sales of PP into injection molded caps and closures soared almost 18 percent in the first quarter, vs. the same quarter in 2009, while sales to distributors jumped almost 27 percent and sales to compounders skyrocketed 67 percent.
Sales of PP into injection molded housewares in the region continued to struggle in the first quarter vs. the year-ago period, dropping 7 percent. Regional sales of PP into injection molded cups and containers also fell 9 percent in the same comparison.
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