The Summer of 2015 began to fade in August — and it took North American commodity resin prices down along with it.
Average per-pound selling prices for polyethylene, polypropylene, polystyrene, PVC and PET all fell in August. PE saw the largest August drop with 5 cents, while PET prices fell 4 cents. Next in line were PP and PS, each with a 2-cent drop, while PVC prices ticked down 1 cent.
“Whenever oil prices move down sharply, most commodity resins prices are bound to soon start moving downward, as well,” said Phil Karig, managing director with the Mathelin Bay Associates consulting firm in St. Louis. “In the case of ethylene-affected resins [like PE and PVC], the recent easing of ethylene supply issues is also contributing to downward pricing pressures.
“Add in weaker export markets, expectations for continued resin price declines … and a growing unease over financial instability in China … and we have all the ingredients for continued price declines in the months ahead,” he added.
All of the pricing changes are reflected in the Sept. 7 print edition of Plastics News. The lower polyethylene prices were noted on PlasticsNews.com on Aug. 27, and the rest of the changes on Sept. 3.
Lower feedstock costs played a role in sending North American PE prices down. The decline effectively wipes out a 5-cent hike that the market had seen in May. Prior to that increase, regional PE prices fell a total of 16 cents between October and April.
North American PE makers now have taken the almost unprecedented step of advising their customers that prices are expected to decline by 4 cents per pound in September. Market sources said this likely is an attempt to stop prices from falling even farther in light of recent stock market volatility, which has threatened to destabilize global economies.
Oil prices remain a global price-setter for PE, even though most PE made in North America is derived from natural gas. West Texas Intermediate oil prices were above $45 per barrel on Aug. 1, but were near $39 per barrel by the end of the month, for a drop of about 13 percent. Prices since then have rebounded to above $46 in late trading Sept. 2.
Abundant supplies of PE also played a role in the 5-cent price drop, according to Mike Burns, a PE market analyst with Resin Technology Inc. in Fort Worth, Texas.
“There are no supply issues for polyethylene or ethylene,” Burns said in a phone interview. “You can almost say that globally.”
PE demand remains solid
PE demand growth in the U.S. and Canada remained solid through July, according to the American Chemistry Council in Washington. High density PE sales in the region were up almost 6 percent in that seven-month period, with domestic growth of 2 percent boosted by a gain of almost 29 percent in export sales.
For low density PE, seven-month sales ticked up almost 2 percent, with 3.5 percent domestic growth hampered by a loss of more than 4 percent in export sales. The linear low density PE market fared better, with sales up almost 6 percent in that time frame. Domestic LLDPE growth of almost 7 percent was softened by growth of only 2 percent in the export market.
The August PP decline averaged 2 cents per pound, although that amount could vary, depending on how much of a decrease buyers saw in July. The two-month July-August dip totaled 3 cents per pound. Some saw that move in 1.5-cent increments, others saw 1 cent in July and 2 in August, or vice versa.
The August PP drop was the second straight month prices for the material have fallen and the third decline in four months. Regional PP prices now are down a net of 17 cents per pound so far in 2015.
At the same time, PP makers in the region have been able to increase their profit margins by about 10 cents per pound in 2015. They've done so by lowering prices by less than the amounts that propylene monomer feedstock prices have fallen. By comparison, producers only gained 1 cent in margin per year in 2013 and 2014.
Tight PP supplies
They've been able to take that step because of tight supplies of PP in the region, according to Scott Newell, a PP market analyst with RTI. “Operating rates [for PP] are as high as we've seen in many years,” he said by phone. “They're above 92 percent for the year and in these last couple of months have been close to 95 percent. Supply is tight, and when you add in some production issues and other dynamics, things can get pinched here and there.”
North American PP growth was solid in the first seven months of 2015, growing 5.3 percent. A 5.9 percent domestic growth rate was dampened by a 10 percent slide in export sales.
Regional PS prices tumbled an average of 2 cents per pound in August. Some buyers reported 3 cent drops, but 2 seemed to be the market average and is being shown on this week's Plastics News resin pricing chart.
That drop came only a month after prices rose 6 cents, prompted by higher prices for benzene feedstock. Benzene prices for August, however, fell about 8 percent to $2.80 per gallon, sending PS resin prices down as well. Regional PS prices now are down a net of 4 cents per pound in 2015.
PS suppliers announce decreases
The region's three major PS makers had pre-announced price decreases for August. The market apparently was able to hold to the 2-cent drops announced by Americas Styrenics and Styrolution instead of the 3-cent decline offered by Total Petrochemicals.
North American PS sales through July essentially were flat vs. the year-ago period. Sales into the market's leading food packaging/food service sector grew 2 percent in those seven months.
For PVC, prices ticked down an average of 1 cent per pound as seasonal construction activity began to slow in the region. Prior to that decline, prices for the material had been flat for four consecutive months. The 1-cent August drop now has regional PVC prices right back where they started on Jan. 1.
U.S./Canadian PVC sales essentially were flat through July, as a gain of almost 3 percent in export sales was canceled out by a decline of almost 2 percent for sales into the domestic market. Sales into PVC's flagship rigid pipe and tubing market also were essentially flat for the seven-month period.
PET bottle resin's 4-cent August drop wiped out a 3-cent hike that some buyers saw in June and others saw in July. In August, some buyers reported a 5-cent price drop, but 4 seemed to the number seen by most buyers and is being shown on this week's PN chart.
For the year, North American PET prices now are up a net of 2 cents per pound. The market continues to struggle with lower consumption of carbonated soft drinks and with increased use of thinner water bottles that use less PET per unit.
