Some surprising late-year price increases have hit North American commodity resin markets.
Average per-pound prices for polyethylene and polystyrene are up since Nov. 1, according to buyers contacted by Plastics News, while suspension PVC prices in the region climbed in both October and November, and PET bottle-resin prices rose in September and October.
The only major commodity material not to see prices climb has been polypropylene which saw prices slip by a total of 2 cents per pound since Oct. 1 although PP makers now are working on price hikes with a Dec. 1 date.
Prices for all grades of high, low and linear low density PE climbed an average of 4 cents per pound in November. Supplies of ethylene feedstock tightened, due in part to an outage caused by a lighting strike at an Ineos Group plant in Texas in early November.
PE makers had expected to win a similar increase in October, but light demand and buyer resolve prevented that increase from taking hold. November, however, was another story.
Ethylene costs are up, but I still don't think there's enough justification for this increase, a Texas-based buyer said. PE makers are just upset they didn't get the increase in October.
They'd normally back off [on increases] this time of year, the buyer said.
The November increase for PE was overdue from October, added Mike Burns, a market analyst with Resin Technology Inc. in Fort Worth, Texas.
Buyers kind of got lucky [in October], he said. Now ethylene has tightened up and producers need to raise prices to maintain their [profit] margins.
U.S./Canadian PE demand has seen modest growth in the first nine months of 2010, according to the American Chemistry Council in Washington. Sales of LLDPE were up 6 percent, with LDPE up almost 2 percent and HDPE flat vs. the same period in 2009.
For HDPE and LDPE, export sales losses diminished the impact of domestic growth. LLDPE exports grew, but at a slower rate than domestic demand.
Regional PE makers now are seeking increases of 5 cents per pound for Dec. 1 and 6 cents for Jan. 1. Buyers weren't convinced the new moves would go through, with one buyer claiming there's currently as much as 100 million pounds of excess PE inventory.
Burns disputed that notion, saying there's no extra material floating around right now.
This isn't the kind of environment for [PE] producers to get sloppy like that, he said.
A 5-cent increase for solid PS in November was tied to higher prices for benzene feedstock, which is used to make styrene monomer. Benzene prices soared 35 cents in November to reach $3.42 per gallon, an 11 percent increase from the prior month. Benzene for December settled at $3.28 a 4 percent drop leading buyers to think further price increases are unlikely.
U.S./Canadian PS sales were up 2 percent in the first nine months of 2010, according to ACC. Almost all of that growth was attributed to export sales, which grew 30 percent. In PVC, a total of 5 cents in increases took hold in October and November. A 3-cent increase originally was nominated for Oct. 1, but that was cut to 2 cents, with the final 1 cent deferred to Nov. 1. PVC makers then added 2 cents to the Nov. 1 increase.
Ethylene was going up, up, up because of outages, and PVC makers had to react, said Nick Vafiadis, a market analyst with Chemical Market Associates Inc. in Houston.
U.S./Canadian PVC demand for the first nine months of 2010 has been severely distorted by a domestic/export imbalance. Overall sales growth looks healthy with an increase of almost 9 percent, but a closer look shows exports soaring more than 80 percent, while domestic sales have tumbled 8 percent.
The domestic PVC market, already battered in 2009, continues to suffer from a weak building and construction market, brought about by the bursting of the U.S. housing bubble. As a result, sales into rigid pipe and tubing the region's dominant end use were down almost 19 percent through September.
PET bottle resin also has warded off losses thanks to a strong export effort. Market tightness and higher raw material costs lifted prices a total of 5 cents per pound in September and October, buyers said, with the fate of a 9-cent move for November still up in the air.
Bottle lightweighting continues to have a big impact on the sector. The North American market also was reshaped recently when DAK Americas LLC bought the North American PET business of Eastman Chemical Co., and with Indorama Ventures Public Co. Ltd. buying the North American PET resin and fiber assets of Invista.
PP remains the only major commodity resin not grappling with recent price increases, due in large part to soft demand for propylene monomer feedstock in October and November, which sent prices down a total of 2 cents per pound. PP resin prices have been mirroring changes in the propylene prices for at least a year.
In North America, PP sales were up almost 3 percent through September, ACC said. The domestic/export relationship in PP was nearly the opposite of PVC. In PP, export sales losses of almost 50 percent blunted domestic sales growth of almost 12 percent.
Market analyst Joe Congdon president of Congdon Plastics Consulting LLC in Sandy, Utah said packaging-related uses are a bright star in the current PP market, but he added he's concerned that this year's domestic growth might be a dead-cat bounce off of last year's lows.
We might see lower domestic consumption next year, Congdon said. And we still might have price volatility, since processors have reduced inventory so much during the recession. [PP processors] can't just buy half of what they'd normally buy when they're already running hand-to-mouth.