The pricing hammer continues to fall on the North American polypropylene market, and regional prices for PVC resin are climbing as well.
Since May 1, regional prices for PP have climbed an average of 10 cents per pound, according to buyers and sellers contacted recently by Plastics News. It's the third time already this year that prices have absorbed a double-digit monthly increase. The previous double-digit spikes were of 17 cents in January and 15 cents in April.
Regional PP prices now are up a net of 37 cents per pound since Jan. 1, reaching an all-time high. The May increase was tied in to a jump of 9.5 cents per pound on propylene monomer feedstock. Propylene supplies have tightened in the short term because of production issues in the Gulf Coast, and in the long term because of increased use of natural gas-based feedstocks, which produce less propylene than crude oil-based feedstocks.
A late April force majeure declaration at a plant operated in Texas by Enterprise Petrochemical Co. also tightened propylene supplies in the short-term scenario. Dow Chemical Co. recently announced plans to increase its North American propylene production, but those plans aren't expected to help the supply situation in the near future.
“The [North American PP] market is still vulnerable to supply disruptions, and will be for the next couple of years,” PP market analyst Scott Newell said.
But relief could be around the corner, as Newell said many PP processors might reduce production in June because of softening demand.
“It appears the market is blowing its top,” said Newell, who's with Resin Technology Inc. in Fort Worth, Texas. “There's a lot of chaos, but I think we're in a better position now than we were in February heading into March.”
North American PP sales totals from the American Chemistry Council in Washington indicate that PP demand already was slowing as early as March. Regional sales of PP for the first quarter of 2011 were down 4 percent, with domestic sales down 5 percent and export sales notching a surprising increase of 18 percent.
Among large North American PP end markets, sales into injection molded housewares were down 14 percent in the quarter, while sales into sheet applications shot up 16 percent.
In PVC, North American prices have edged up 3 cents per pound in April and another 5 cents since May 1, market sources said. That's on top of a 3-cent increase that took hold in March.
The April and May increases were aided in part by a force majeure declared by Georgia Gulf Corp. on PVC shipments from its plant in Plaquemine, La. Officials with Atlanta-based Georgia Gulf said in mid-April that production problems at the plant had reduced effective production capacity at the plant by 33 percent.
Officials also said the plant has been having difficulty sourcing ethylene feedstock and the reduction in production capacity was expected to last “for the next few months.” Georgia Gulf generated more than 40 percent of its 2010 sales from PVC and related feedstocks.
The price increases put the PVC market in an awkward spot, since producers need to improve their margins while the market continues to struggle from a construction market that's now in its fourth year of historical weakness. U.S. housing starts are expected to be well under 1 million again in 2011, after rarely falling below that mark in the previous 30 years.
But the North American PVC market has found salvation in the form of exports, as developing markets around the world remain in great need of PVC as a building product. U.S./Canadian PVC export sales climbed 30 percent in the first quarter, wiping out a 4 percent drop in domestic sales and propelling the overall market to a 6 percent gain.
In PVC end markets, rigid pipe and tubing remained the largest by volume in pounds, but sales fell almost 14 percent in the first quarter vs. the same period in 2010 — which also was a poor year for construction results.