North American selling prices for polyethylene, PVC and PET resins all have risen since April 1, while regional prices for polypropylene have taken a surprising fall.
PE prices rose by an average of 4 cents per pound as oil prices recovered from less than $38 per barrel early in the month to almost $45 in early trading April 27. Oil is a global price setter for PE, although natural gas is the most common PE feedstock in North America.
Regional PE prices now have risen in back-to-back months after dropping in the first two months of 2016. The 5-cent January/February drop had been canceled out by a 5-cent gain in March.
“Just about everyone in the PE market sees the massive wave of capacity starting to come online soon, and PE processors are anxious to start enjoying a multi-year buyer's market,” said Phil Karig, managing director with the Mathelin Bay Associates LLC consulting firm in St. Louis.
“Unfortunately, oil prices are supporting strong PE export volumes right now and domestic operating rates are extremely tight,” he added. “So PE producers are determined not to miss one more chance to increase their margins before the whole PE pricing complex starts to roll downhill as we move toward 2017.”
The 4-cent April hike was the result of “pure determination” on the part of North American PE makers, according to Mike Burns, a PE market analyst with Resin Technology Inc. in Fort Worth, Texas.
“Without oil getting to $50, the increase should have been hard to get, but [PE makers] got it,” he said. Burns added that lower Asian resin prices and high oil prices could open the door for finished PE products to enter the market later in 2016, creating the possibility of lower North American PE prices or at least fewer increases.
North American PE markets also could be tightened by the April 20 explosion at a plant in Mexico that made ethylene feedstock and other petrochemical products. The incident has resulted in at least 32 deaths and caused force majeure to be declared on products made there.
The complex near Coatsacoalcos was a joint venture between Mexican state oil firm Petroleos Mexicanos (Pemex) and PVC pipe leader Mexichem SAB de CV. Pemex already had been facing shortages of ethane needed to make ethylene, Burns said.
Through March, U.S./Canadian LDPE sales were up just over 2 percent vs. the same period in 2016, according to the American Chemistry Council in Washington. Regional LLDPE sales were up almost 9 percent in the same comparison.
PVC, PET up
PVC suspension resin prices bumped up an average of 2 cents per pound in April, as warmer weather increased demand for construction-related products. Prices for the material had climbed 4 cents in March after being flat in February.
The Mexican outage also should have an impact on the regional PVC market, since the plant was a major supplier of vinyl chloride monomer feedstock. One industry source said that regional operating rates for suspension PVC resin already were above 90 percent before the accident.
U.S./Canadian PVC sales were off to a strong start in the first quarter of 2016, growing 8.3 percent. Domestic sales growth of 2.5 percent was bolstered by a surge of almost 23 percent in the export market.
North American PET bottle resin prices also ticked up 2 cents per pound in April, as warmer weather improved seasonal demand for bottled water and carbonated soft drinks. It's the second straight monthly price hike for that material, following a similar 2-cent move in March.
Prior to these back-to-back increases, regional PET prices had fallen for six consecutive months.
PP surprise
The regional PP market surprised some by posting a 3-cent price drop since April 1. Prices had climbed in five of the previous six months, raising prices a total of 11 cents per pound.
Market watchers said the April drop was the result of increased competition coming from PP imported into North America from other parts of the world. Growing PP demand and limited supplies have created the opportunity for foreign suppliers to enter the region, sources said.
The decrease occurred even though prices for propylene monomer feedstock increased slightly in April, according to Scott Newell, a PP market analyst with RTI. “It's a very competitive [PP] marketplace all of a sudden,” he said. “The domestic guys have to compete with material from Korea, Brazil and other places.
“Supply is being added through imports, so [PP] producers are saying they need to back down their prices before they get too far out of line.”
Karig at Mathelin Bay added that PP producers have enjoyed healthy margin expansion over the last several years as operating rates tightened and the industry “hardly had to worry” about lower priced PP imports. But now, he added, low-cost PP imports “roared into the US market over the last few months and domestic PP producers finally had to take note of them.”
“Now that oil prices have bottomed, PP imports are not as attractive as they were, but there are still enough lower priced imports floating around to make the PP market interesting,” Karig explained. “What's also interesting is that there's currently a wider than normal range of prices among PP buyers, as some buyers are benefiting disproportionately from the import market.”
In addition to South Korea and Brazil, sources told Plastics News that Saudi Arabia, Colombia, Thailand and Singapore also have been active in importing PP into North America.
A PP buyer in the Midwest U.S. said that he expects more price drops as increased summer gasoline production lifts supplies of propylene monomer feedstock. Market watchers added that lower oil prices already have increased supplies of propylene in the region by allowing more use of crude oil, which produces more propylene than natural gas does.
Regional PP production remains limited as a result of at least 3 billion pounds of North American capacity being removed during the recession. No major PP expansions for the region have been announced. As a result, Newell said, imports of PP could make up more than 5 percent of the market by the end of 2016.
Through March, North American PP sales were up almost 2 percent, with a 3 percent domestic sales gain softened by a 44 percent drop in export sales.