In most Decembers, resin makers try to focus on the holidays and on spending time with their families. This improves their mental well-being and also takes their minds off of the fact that their markets usually get clobbered on the pricing front in the last month of the year.
December 2014 was no exception to this seasonal rule. Regional prices for all grades of polyethylene — as well as for polypropylene, suspension PVC and solid polystyrene — each tumbled for the month. For most of these materials, a near-historic drop in oil prices was the reason for the drop, as per-barrel numbers have tumbled from more than $100 mid-year to less than $50 in recent weeks.
The PP drop was a doozy — a 10-cent plunge that sent prices for that material into negative territory for the year, going from a 2-cent net gain to an 8-cent net loss. North American demand was doing nothing to support market prices, with 2014 sales flat through November. Domestic sales into the sheet market provided a glimmer of hope – growing more than 8 percent through November — but other PP-consuming sectors didn't fare as well.
In PE, a 4-cent drop followed a 3-cent drop that had taken hold in November. Both of these are noteworthy, as they mark the first two price drops seen in the North American PE market since late 2012. Those drops negated 7 cents in increases that had been implemented earlier in the year, meaning North American PE prices ended 2014 at the exact same spot where they had been on Jan. 1.
And even though natural gas is used to make most of the ethylene that goes into North American PE as well as PVC, crude oil remains the global price-setter, since that's the material used as an ethylene feedstock in the majority of global markets. PE makers had benefited in recent years from sky-high profit margins as high oil prices set PE prices, while low natural gas pieces provided them with an affordable feedstock.
On the demand front, the 2014 U.S./Canadian PE market wasn't exactly parade-worthy in the first 11 months of the year. High density PE sales were down almost 1 percent, with a 13 percent export sales drop wiping out a gain of almost 2 percent in domestic sales. Low density PE eked out a sales gain of almost 1 percent, as a domestic sales gain of just over 1 percent was softened by an export sales gain of less than 1 percent.
Eleven-month sales of linear low density PE in the U.S. and Canada essentially were flat, with a domestic sales gain of almost 3 percent neutralized by an 11 percent drop in export sales. Taken as a whole, U.S./Canadian PE sales — counting all three major grades — basically were flat through November 2014 at just over 35 billion pounds.
PVC prices tumbled 3 cents per pound in December as well, with lower ethylene costs playing a big role in that decline. Thanks to earlier price increases, however, North American PVC prices finished the year up an average of 6 cents per pound from where they were at the start of 2014.
Where demand was concerned, PVC — like PP and PE — was traveling on a lackluster path in the first 11 months of 2014. U.S./Canadian sales of the material had dipped almost 2 percent in that period, with domestic sales growth of almost 3 percent wiped out by a plunge of more than 10 percent in export sales.
For PS, a 4-cent December price drop pushed that material's slide in the last four months of 2014 to 12 cents per pound. Early-year price increases again saved the day for PS makers in the region, allowing the net 2014 PS price change to be limited to a drop of only 1 cent. Lower benzene feedstock prices initiated the PS slide, falling more than 20 percent in the second half of the year.
But PS has continued its “can't win for losing” behavior of recent years, as producer Americas Styrenics already has taken the rare step of announcing a price drop of nine cents — no, they really pre-announced a nine-cent price drop — for January.
Demand-wise, North American PS apparently won't be able to build on the 1 percent sales gain it posted in 2013 — its first positive sales year in a decade. Through November, North American PS sales for 2014 were down 3 percent. The material's market-leading food packaging/food service category posted 11-month growth of almost 2 percent, but most other categories showed declines.