The ongoing slide in crude oil prices is taking commodity resin prices down as well.
North American prices for all grades of polyethylene, polypropylene, suspension PVC and solid polystyrene each dropped in January. Prices for crude oil have fallen more than 50 percent since mid-2014, affecting prices for feedstocks used to make these resins. West Texas Intermediate crude was trading near $44.50 per barrel on Jan. 29 — its lowest price since early 2009.
For January, regional PE prices fell an average of 4 cents per pound, while PVC dipped an average of 2 cents per pound. Price decreases for PP and PS were far more extreme, with PP plummeting 10 cents per pound and PS plunging 9 cents per pound.
The PE decline is the third consecutive monthly drop for that material after the market had not seen a single price decrease in two years. Prices had fallen a total of 7 cents in November and December. The oil decline has affected prices for ethylene feedstock used to make PE. The price of oil sets global prices for the material, even though natural gas is used to make most ethylene used in North American PE production.
Some major North American PE buyers were pushing for a 5-cent price drop in January, but in most cases producers were able to limit the decrease to 4 cents, according to market sources contacted by Plastics News.
Regional PE demand hasn't done much to offset these price reductions. Through November, U.S./Canadian PE demand was down almost 1 percent in 2014, with sales of low density PE up less than 1 percent and regional linear low density PE sales flat vs. the same period in 2013.
PE market analyst Mike Burns with Resin Technology Inc. in Fort Worth, Texas, said that given the amount of feedstock price decline, larger PE resin price drops would be expected.
“Film processors [in North America] have begun to be challenged from almost every region of the world with lower finished goods price requests,” he added.
PVC tied to ethylene
PVC prices also are affected by ethylene feedstock, resulting in the 2-cent January drop. That move came after prices had declined by a total of 5 cents in November and December. Demand for the material could be picking up as construction companies build inventories of pipe and other PVC products in advance of the spring building season.
There's plenty of room for PVC demand improvement in North America after U.S./Canadian sales of the material slipped almost 2 percent in 2014, according to the American Chemistry Council. A gain of almost 3 percent in domestic sales was wiped out by a plunge of more than 10 percent of sales into the export market.
Bright spots for the domestic PVC market in 2014 came in sales to compounders, which skyrocketed 42 percent, and into siding and related uses, which were up more than 4 percent.
The 10-cent PP price drop in January followed an identical decline in December. For better or worse, PP buyers might be accustomed to double-digit price swings, since they've now seen 13 such moves since May 2010, according to the Plastics News resin pricing chart.
January prices for polymer-grade propylene monomer feedstock actually fell 12 cents per pound, but PP suppliers were able to limit the resin drop to 10 cents, which improved their own margins, sources said.
Short-term PP supplies in the region could be affected by force majeure supply limits at a resin plant operated by Ineos Group in Alvin, Texas, and by similar conditions at a plant operated by Phillips 66 in Linden, N.J. The Linden plant had been scheduled for a 30-day maintenance turnaround beginning March 1, but operational issues caused Phillips 66 to close the plant earlier than expected, officials said in a recent letter to customers.
RTI PP market analyst Scott Newell said that propylene markets currently are stable, which could lead to flat prices for PP resin in February.
North American PP demand also was unimpressive in 2014, finishing essentially flat with 2013. Export sales growth of 5.5 percent was neutralized by a decline of less than 1 percent in the domestic market. Regional sales of PP into the sheet market enjoyed a strong year in 2014, increasing by almost 8 percent.
The 9-cent drop seen in the regional PS market had been announced by producer Americas Styrenics on Dec. 31. Looking at the PS feedstock situation, that drop could have been worse. Prices for benzene, a key feedstock used to make styrene monomer, swooned 35 percent in January to close at $2.20 per gallon. More benzene price drops might be seen in February, sources said.
The January PS decline was the fifth straight monthly drop, for a total of 21 cents. Regional PS demand through November was down 3 percent, returning the market to a loss after it had notched its first growth year in a decade in 2013.