LAKE LAS VEGAS, NEV. — Lower oil prices will continue to affect North American markets for polyethylene and polypropylene resin in the months ahead.
That's the expectation of resin market pros, Mike Burns and Kevin Roberson, both of whom are with Fort Worth, Texas-based Resin Technology Inc. Burns and Roberson spoke at the 2015 Plastics News Executive Forum, Feb. 4-6 in Lake Las Vegas.
Burns — who covers PE for RTi — said that based on oil's drop of more than 50 percent since mid-2014, regional PE prices should have fallen more through January. Prices are down 11 cents per pound through January, with Burns saying a few more cents should come out of the market in March.
The delay of “aggressive price decreases” is having an impact on North American resin processors by making their products less competitive vs. PE goods from Southeast Asia. If North American PE prices don't see further drops, this North America/Southeast Asia price gap “will undo benefits from reshoring,” Burns added.
“Wal-Mart isn't going to order from a North American supplier if their products cost 10 cents more,” he said.
Roberson addressed the more volatile PP market, where prices have fallen a total of 20 cents per pound — 10 cents coming out in both December and January.
“Price volatility in North America is more than in other parts of the world,” Roberson said. “And our prices are higher than in most regions, which has affected our ability to export resin.”
Lower PP profitability from lower oil prices also might lead to delays for several projects designed to make additional propylene feedstock via PDH technology, he added.
“There's a fear of overbuilding, and construction costs have increased,” Roberson said. “The Dow and Enterprise projects should come on [in 2015 and 2016], but the rest are uncertain.”
In spite of some recent growth, North American PP sales remain 15 percent below peak levels seen in 2007. PP capacity expansions are at least several years away, according to Roberson.
“It's hard to go to your board and ask for hundreds of millions of dollars [for PP expansions] when your margins are down,” he said.