One of the many wonderful things about the resin market is its never-ending ability to surprise.
That's happening again right now, as North American polyethylene makers began telling customers in late August that prices could fall 4 cents in September. That's like a poker player not only showing his cards to the other players, but magnifying those cards and displaying them on a screen right behind his head.
PE market watchers are saying that producers have taken this almost unprecedented step in order to stop prices from falling even further in the midst of global economic volatility. Regional PE prices already had fallen an average of 5 cents per pound in August as oil prices fell.
That's the kind of month August was — the kind that could make even hardened PE sellers do things they never thought they'd do. Per-share stock prices of plastic materials firms got hammered in August as well. And PE wasn't alone in taking a price plunge — regional prices for polypropylene, polystyrene, PVC and PET bottle resin fell as well.
“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.”
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 $47 in late trading Sept. 15. 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.
How did PE buyers in the region take the news?
“The U.S. PE price has to be lower to continue competitive exports,” a Texas-based buyer told Plastics News. “Of course, if exports are down because U.S. PE prices are too high that leads to oversupply [in the U.S.], so it's kind of a vicious circle.
“But U.S. [PE profit] margins are still high. They may have room to come down some more.”
PE demand growth in the U.S. and Canada remained solid through July, according to the American Chemistry Council. High density PE sales in the region were up almost 6 percent in that seven-month period, with low density PE up almost 2 percent and linear low density PE sales up almost 6 percent in that time frame.
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.
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. 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.
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. Prior to that decline, prices for the material had been flat for four consecutive months.
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 cents seemed to the number seen by most buyers.
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.
