A summer heat wave has melted North American prices for polyethylene, polypropylene and PET bottle resin.
Since July 1, average selling prices for high, low and linear low density PE in the region are down 3 cents per pound, according to buyers and market watchers contacted recently by Plastics News.
Average PP prices have fallen 4 cents per pound in the same time frame, while average prices for PET are down 2 cents, sources said. These changes are reflected on this week's PN resin pricing chart.
“Summer doldrums are pretty normal,” said Phil Karig, managing partner of Mathelin Bay Associates LLC, a St. Louis materials consulting firm. “But we may also be seeing a reflection of what's going on in the economy as a whole.
“There's been some inventory buildup, and that could lead to a slowdown in demand,” he added. “There might be less risk-taking than what you'd normally see.”
In PE, prices fell for the second straight month in July, after prices had climbed an average of 11 cents per pound in the first five months of the year. Some HDPE makers reported seeing a price drop of 4 cents in July, but most buyers contacted by PN reported a 3-cent slide.
PE makers “tried to get out in front” of the July decrease, a Texas-based PE buyer said.
“There had been inventory builds and China had backed off of purchases for a while,” he said. “Plus all [North American ethylene feedstock] crackers were up and operating.”
Moving ahead, however, lower inventories and stronger export sales could lead to a higher-price environment, according to Mike Burns, a market analyst with Resin Technologies Inc. in Fort Worth, Texas.
Major PE makers already have announced increase attempts of 5 cents per pound for Aug. 1. Dow Chemical Co. also has announced a 6-cent hike for Sept. 1, sources said. Numerous scheduled maintenance turnarounds for ethylene crackers might give the increase attempts some leverage, sources said.
Through May, 2011 had been a good sales year for U.S./Canadian HDPE, a so-so year for LLDPE and a not-so-great year for LDPE, according to sales data from the American Chemistry Council in Washington.
Regional HDPE sales were up more than 6 percent through May, with domestic and exports sales seeing equal growth. Sales of HDPE into pipe and conduit were especially strong in the region for that five-month period, growing almost 20 percent.
LLDPE sales in the region were up more than 3 percent, with a 1.5 percent drop in export sales tempering domestic growth of more than 5 percent. Sales of LDPE in the region did not fare as well, dropping more than 1 percent as a 10 percent drop in export sales wiped out a domestics sales gain of 1 percent.
PP's lurching ride through 2011 continued, as July's 4-cent drop came after a massive 15-cent price drop in June. But that June drop did not even negate half of the 37 cents worth of price increases that hit the market between January and May.
Equal swings in price for propylene monomer feedstock have been blamed for the volatility of 2011.
“Almost all of the margin is gone in the [PP] business,” said a PP buyer in the Midwest. “[Prices] are just doing whatever monomer does.”
High prices in turn drove down regional PP demand — which is down almost 5 percent through May, according to ACC — but now with prices going down, the pendulum may be swinging back again already.
“The assessment is that if the [PP price] market hits bottom in July, that will drive more people to buy,” the buyer said. “That could create a run on the bank and drive [monomer] prices up.”
He added that high regional PP prices — caused in part by increased use of natural gas-based feeds, which create less propylene than crude oil-based feeds do — has driven production of some PP products from North America.
“Demand has been killed in a lot of area, or it's shifted overseas, and it's not coming back any time soon,” the buyer said. “It wouldn't surprise me if there's more [PP] resin capacity taken out [in North America] in the next couple of years.”
RTI market analyst Scott Newell agreed that “there's been some demand destruction from higher [PP] prices” in North America. Regional PP prices “definitely have corrected themselves” in the last two months, and might be heading up again, due in part to maintenance turnarounds at monomer plants, he added.
The drop of almost 5 percent in PP sales resulted from a 14 percent in export sales worsening a 4 percent drop in domestic sales. Among regional end markets, sales of PP into injection molded housewares took a big hit in the first five months of the year, falling 16 percent.
For PET, the 2-cent July drop followed a combined drop of 4 cents in May and June. A PET buyer in the Midwest said the July drop was shaping up to be a larger one until prices for paraxylene feedstock strengthened late in the month.
The buyer added that the regional PET market may have seen the height of its 2011 demand already, since its dominant carbonated soft drink end market typically peaks in summer months.
PET makers “could be looking at a couple of flat months” after July, he said.