Continued pressure from imported material has sent North American polypropylene resin prices down another penny per pound since July 1.
The 1-cent drop in July marks the fifth straight monthly decrease. Regional PP prices had fallen 4 cents in June. The total 5-month decline has averaged 10 cents per pound, although buyers have seen these decreases come through in varying increments at different times.
Growing supplies of PP imported from outside of North America have caused regional suppliers to drop their prices to meet competitive situations.
“We are still feeling the effects of imports and the fact that domestic producers have not cut [production] rates,” market analyst Scott Newell said. “Inventories dropped in June, but overall levels are up 170 million pounds since the beginning of the year, not including import inventories.”
Newell — who's with Resin Technology Inc. in Fort Worth, Texas — added that lower domestic PP prices, especially in the secondary markets, have recently decreased incentives for imports.
“Import volumes will come down,” he said. “Prices are at a point where the bulk of the margin erosion has come out of the market.”
The market “has been very difficult to pin down this year, because each supplier is charting their own course,” according to David Barry, a market analyst with the PetroChem Wire consulting firm in Houston. “We saw companies like ExxonMobil announcing price decreases or temporary voluntary allowances in the second quarter, presumably because they lost market share by raising prices too far, too quickly.
“I think most participants now believe that the PP market will reach an equilibrium in August, and that price erosion will be halted,” he added.
Imports found a home in North America as the region's PP production struggled to keep up with demand in late 2015 and early 2016. This imbalance was partly the result of large amounts of PP production capacity being eliminated when demand fell during the recession.
North American PP demand was up less than 1 percent in the first half of 2016. A drop of almost 11 percent in export sales softened domestic sales growth of 1 percent, according to the American Chemistry Council in Washington.
Strong North American growth areas for first-half PP sales included injection molded caps and closures (up 4.9 percent) and sheet (up 5.6 percent).