North American prices for polyethylene and polypropylene resins moved in different directions in August, with PE rising and PP on the decline.
PE prices have increased by an average of 5 cents per pound since Aug. 1. It's a reversal of fortune for that material, which saw prices fall by 7 cents in both May and June before staying flat for July.
Market sources said that some PE buyers that are single-sourced to Nova Chemicals Corp. of Calgary, Alberta, or Total Petrochemicals USA Inc. of Houston may have seen an increase of only 3 cents for August. In Nova's case, the 3-cent hike only applied to customers in the film market, sources said.
But the majority of the market saw the full 5 cents take hold, according to buyers and market watchers contacted by Plastics News. Hurricane Isaac's presence in the Gulf Coast — home to a large amount of production for PE resin and feedstocks — also may have played a role in the larger increase establishing itself.
“The storm kicked it over [from 3 cents to 5 cents],” said a PE buyer in the Southeast. “Resin was tight to begin with and oil prices have been up. There's some ethylene available, but there also have been some unscheduled outages.”
“The [PE] market was tighter than people realized,” another market watcher said. “There was no resin available at the end of July. There had been a huge draw from processors and the export market. Everyone was buying because prices were so low.”
The market watcher added that this type of artificial demand was “only a Band-Aid” for the region's PE makers. The Southeastern buyer agreed that there had been “a huge [PE] inventory build” in North America since mid-July. His own firm had allowed its PE inventory to drop below 10 days earlier this summer — a very low level — but now has more than 15 days of PE inventory in place.
The first half of 2012 wasn't a great one for PE sales in the U.S. and Canada. Sales of high density PE ticked up about 1 percent, with domestic growth of almost 3 percent dampened by a decrease of 6 percent in export sales, according to the American Chemistry Council in Washington.
Sales of low and linear low density PE in the region each saw small sales declines in the first half. LDPE sales fell almost 1 percent, as export sales growth of almost 6 percent did not completely erase a 2 percent domestic sales loss. In LLDPE, overall sales fell 2 percent, with a 2 percent domestic sales gain wiped out by an export sales drop of almost 15 percent.
Among major HDPE end markets, sales into pipe and conduit surged 10 percent in the first half. Sales of LDPE into non-packaging film grew almost 9 percent, and sales of LLDPE into injection molding applications jumped almost 15 percent during that same period.
In the PP market, prices have fallen an average of 2 cents per pound since Aug. 1. Some buyers saw a drop of only 1 cent and some reported 11/2 cents, but the 2-cent rise was seen by a majority of buyers and market watchers contacted by Plastics News.
The decline continues a downward trend for regional PP prices. Those prices shot up an average of 22 cents per pound in the first four months of the year, but now are down an average of 27 cents per pound since May.
The propylene monomer market again is exerting its influence on PP prices, since propylene supplies have been plentiful for the last several months. In an email, market analyst Scott Newell said demand has been soft for most propylene derivatives, with the exception of PP sales within the U.S. and Canada. First-half domestic PP sales were up almost 6 percent, according to ACC.
“We have to keep in mind that PP demand has inherited the volatility of its feedstock — buy heavy at the bottom and work off inventory at the top, essentially chopping off the top of the market,” said Newell, who is with Resin Technology Inc. in Fort Worth, Texas. “We are presumably at the bottom of one of these mini-cycles.
“A lot of the demand we have seen lately is restocking and opportunistic,” he added. “Based on what we see on the street, real demand is not as good as the numbers suggest.”
Overall U.S./Canadian PP demand was up about 4 percent in the first half, with a big 23 percent drop in export sales softening that 6 percent domestic sales gain.
Among major PP end markets, sales into injection molded cups and containers led the way with first-half sales growth of almost 17 percent.
The market also benefited from an increase of 17 percent in sales to resellers, distributors and compounders.
Looking ahead, regional PE makers have announced increases of 5 cents per pound for Sept. 1, while PP makers are seeking 4-cent increases for that same date.
The Southeastern PE buyer said rising inventory levels might make it difficult for the September PE increase to take hold.
In addition, ongoing weather issues could affect the new PE increase attempt.