North American prices for polypropylene resin reversed course and headed back up in October — while PVC and PET prices continued trending down, and prices for polyethylene and polystyrene took the month off.
The PP hike averaged 3 cents per pound and was driven in part by reduced production at a major PP plant operated by LyondellBasell Industries. Houston-based LBI — the region's largest PP maker — declared force majeure on PP on Oct. 7, two days after a power outage hit the firm's plant in Bayport, Texas. The plant has annual production capacity of almost 1.6 billion pounds.
The outage has limited the availability of PP throughout North America. The PP market “isn't tight — it's outright short of resin,” a PP buyer in the Midwest U.S. told Plastics News.
The October increase reverses a trend that had seen regional PP prices fall for three straight months, and four times in the last five. Even with the increase, regional PP prices are down a net of 15 cents per pound so far in 2015.
The PP demand picture has been more positive, with North American sales up almost 5 percent through August, according to the American Chemistry Council. Domestic growth of 5.5 percent was lessened by an almost 14 percent drop in export sales during that nine-month period.
At last month's Global Plastics Summit 2015 conference in Chicago, PP market analyst Joel Morales said that the oil price crash in the second half of 2014 has led to accelerated PP growth by lowering prices for that resin.
“Low prices stimulated demand, and that resulted in higher margins,” said Morales, who's with GPS co-host IHS Chemical in Houston. He added that North American PP operating rates should be above 90 percent through 2020.
No new PP capacity is expected in the region until Formosa Plastics Corp. USA brings on almost 1 billion pounds in Texas. As a result, Morales said, PP imports will be needed to meet new demand.
While PP prices headed up, PVC and PET continued in the opposite direction, each falling 1 cent per pound, due in part to lower seasonal demand.
It's the third straight 1-cent drop for PVC in the region. Sales of the material typically slow down as cooler temperatures slow construction, PVC's largest end market. Prices now are down a net of 2 cents per pound so far in 2015.
Some domestic PVC end markets have fared well in 2015 in spite of overall softness in demand. Sales of PVC into wire and cable in the region have grown more than 7 percent in the nine-month period, while sales into siding and related uses are up more than 4 percent.
Regional PET bottle resin prices also notched a 1-cent downturn in October. Prices for that material now have fallen for three consecutive months. The 1-cent October drop followed declines of 4 cents in August and 3 cents in September.
PET bottle resin prices now are down a net of 2 cents per pound so far in 2015. The market continues to struggle with resin overcapacity and with reduced demands for carbonated soft drinks, its largest end market.
At GPS 2015, IHS analyst Tison Keel said that the global PET field remains awash in excess capacity. North American PET has been oversupplied since 2012, and the Asian PET market had been oversupplied for several years before that, he explained. The result is a 70 percent global operating rate which Keel described as “not attractive.”
“The market will continue to be challenged unless it takes shutdowns of PET capacity,” he added. “It will have to happen — it's irrational not to take it out.”
Between 650 million and 1 billion pounds of PET capacity could exit North America after 2016, he said. Another 330 million to 550 million pounds of PET resin capacity in the region could be converted to fiber.
Flat October pricing for both PE and PS gave producers a welcome respite from recent price drops. All grades of HDPE, LDPE and LLDPE had slid 4 cents per pound in September, while PS took a dizzying 9-cent dive.
IHS analyst Nick Vafiadis said at GPS 2015 that the North American PE industry “is on the cusp of change” with more than 10 billion pounds of new capacity scheduled between now and the end of 2017.
“If you're a seller, you're going to see increased competition, more capacity chasing demand and price and margin pressure,” he said. “If you're a buyer, you're going to see more supply options, increased competition and increased quality demands.”
In the near-term, regional PE prices should be flat through the end of 2015, Vafiadis added, with tight production and higher feedstock costs making a 3-cent-per-pound price hike likely in March. But with new capacity coming on in the second quarter, prices may fall as much as 5 cents.
The mixed bag of October results for North American commodity resins comes after two straight months where all five materials — PE, PP, PVC, PS and PET — fell in price. On the broader feedstock front, crude oil prices have remained less than robust. Per-barrel prices for West Texas Intermediate (WTI) crude had fallen to less than $43 in late trading Nov. 11.