North American commodity resin prices have been active in the first month of 2016, with polypropylene prices on the rise while prices for polyethylene and PVC have declined.
Regional PP supplies remain tight, allowing a 3-cent-per-pound price hike to take hold since Jan. 1. That represents half of a 6-cent move originally announced by suppliers. They're expected to push for the remaining 3 cents in February.
The January hike marks the fourth straight month that North American PP prices have increased. Those increase combined have pushed prices up an average of 10 cents per pound.
Most recently, Ineos Olefins & Polymers USA on Jan. 18 announced force majeure production limits on copolymer PP made at its Chocolate Bayou plant in Alvin, Texas. Output at the site, which has nearly 1 billion pounds of annual PP capacity, will be limited until mid-February because of an equipment failure, according to industry sources.
“With the lack of new PP capacity and incremental resin demand growth, PP capacity utilization has creeped up to the point where PP producers have been able to move into a seller's market and increase their margins over monomer drastically over the last year and a half,” said market analyst Phil Karig in an email.
“PP producers were really able to demonstrate their pricing power in January by increasing PP prices even as crude oil prices plummeted,” he added. “Looking forward, there is no substantial new PP capacity other than plant de-bottlenecking that is scheduled to come on line anytime soon. Substantial pricing power will remain in PP sellers' hands for the foreseeable future.”
This ongoing tightness might lead North American processors to look outside of the region to meet their PP needs, according to Karig, managing director with Mathelin Bay Associates in St. Louis.
“The fastest way for PP processors to reduce their costs is to locate and source imported PP when they can find it,” he said. “PP prices in the Mideast, including Turkey and Israel, are currently as much as 25 cents or more lower than in the U.S.
“The gap between the U.S. and the rest of the world is large enough to offset the costs of freight and duty as well as the hassles of extended shipping times and having to take deliveries in 1-ton bags rather than in bulk.”
North American PP sales grew 5.3 percent in 2015 to more than 17.2 billion pounds, according to the American Chemistry Council in Washington. Domestic market growth of 6.3 percent was tempered somewhat by a drop of almost 23 percent in export sales.
Some regional PP end markets surpassed that 6.3 percent growth average. Sales into injection molded housewares soared 12.2 percent, while PP sales into sheet jumped 13.6 percent. PP sales into oriented film were up 7.3 percent.
Polyethylene prices slide
In PE, prices have fallen an average of 3 cents per pound since Jan. 1, driven lower by plummeting global oil prices. Crude oil prices have been below $30 per barrel in recent weeks — only 18 months after being above the $100 mark. Although natural gas is used as a feedstock in most North American PE, oil prices remain a price-setter for PE on a global basis.
The January PE price drop ended a three-month stretch in which prices for the material were flat. With oil under $30, more PE price drops might be seen in February, according to Mike Burns, PE market analyst with Resin Technology Inc. in Fort Worth, Texas. Regional PE prices remain competitive vs. imported material, he added.
Regional PE makers had been trying to raise prices an average of 5 cents per pound in recent months, but that attempt has been put on hold by some suppliers. Through October, U.S./Canadian sales of high density PE were up 6.6 percent, according to ACC. Domestic sales were up only 1 percent for the period, but export sales rocketed up almost 42 percent. Sales of HDPE into household chemical bottles provided a domestic bright spot, growing 7 percent.
Regional sales of low density PE through October improved 3.3 percent, with domestic growth of almost 4 percent lessened somewhat by growth of only 1.2 percent in export markets. Sales of LDPE into non-food packaging film soared more than 11 percent in that 10-month period.
For linear low density PE, 10-month sales grew 6.3 percent. Domestic sales growth of almost 6 percent was amplified by a 9 percent rise in export sales. Sales of LLDPE into all types of film — packaging and non-packaging — climbed almost 8 percent in that period.
Low-priced natural gas has led to a boom in construction of new PE units. The Braskem Idesa joint venture recently began production at a new unit in Mexico, while Nova Chemicals is set to launch a new line in Joffre, Alberta by the end of the year. Four billion pounds of capacity could be added in the region by the end of the year, with as much as 34 billion pounds being added through 2020.
“The wave of new PE capacity is starting to hit the market,” Karig said. “The new PE producers are looking to gain share while current PE producers are scrambling to make sure that they don't lose market share.
“As we move through 2016 and into 2017 the fight for market share is likely to intensify — and the market-wide price reduction in January … are the first skirmishes in the fight for market share,” he added.
PVC prices dip
For North American PVC, prices ticked down an average of 1 cent per pound in January, as a result again of low oil prices and weak seasonal demand. Prices for the material had been flat in November and December.
PVC makers in the U.S. and Canada had a challenging 2015, as sales declined 1.9 percent to just over 14.7 billion pounds, according to ACC. A domestic sales drop of 2.1 percent was softened by a decline of only 1.5 percent in export sales.
Lower-than-expected growth in the U.S. construction market played a big role in U.S./Canadian PVC sales for 2015. Construction-related uses in 2015 generated almost 62 percent of domestic PVC sales.
The rigid pipe and tubing end market — with a 45 percent share of domestic sales in 2015 — saw demand slide almost 1 percent. That was enough to negate most of the 2015 PVC volume growth recorded by siding and related uses (up 5.6 percent), extruded windows and doors (up 1.8 percent) and fencing and decking (up 3.4 percent).