The lazy, hazy days of summer took effect in July, as North American prices for all commodity resins were flat — with the notable exception of polypropylene.
Continued pressure from imported material sent PP prices down another penny per pound in July. The 1-cent drop in July marks the fifth straight monthly decrease. Regional PP prices had fallen 4 cents in June. The total five month decline has totaled 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 domestic 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 is 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.
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 PetroChem Wire, a Houston-based consulting firm. “I think most participants now believe that the PP market will reach an equilibrium in August, and that price erosion will be halted.”
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 Washington-based American Chemistry Council.
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).
Elsewhere, June prices held for July. Regional prices for solid polystyrene had fallen in June, while PVC prices had risen and prices for all grades of polyethylene and PET bottle resin were unchanged.
For solid PS, flat July pricing follows a 2-cent June drop and temporarily halts a bumpy pattern for that material. Prices had been flat in May after increasing by 5 cents in April. The June slip was connected to a 4 percent price decline for benzene feedstock, which is used to make styrene monomer.
On the demand front, North American sales of solid PS fell by 1.5 percent in the first half of 2016, according to ACC. That drop took place even as sales into food packaging/food service grew more than 1 percent and sales into the electrical/electronic market grew almost 6 percent.
Food packaging/food service accounted for almost 65 percent of regional solid PS sales for the first half, with electrical/electronic bringing in a market share of more than 9 percent.
PVC prices were flat in July after strong construction activity had sent prices for that material up an average of 2 cents per pound in June. That marked the third time in four months that regional PVC prices had increased.
On a sales basis, PVC had the best first half of any commodity resin in the region. Sales of the material grew 7.4 percent in the six-month period. Sales of PVC into export markets were up almost 14 percent in the first half, which helped boost domestic sales growth of almost 5 percent.
The domestic PVC market benefited from a rebounding U.S. housing market. That market is on track to record around 1.2 million housing starts this year, which would be up almost 10 percent from 2015. More than 60 percent of domestic PVC sales went into construction markets in the first half.
Sales of PVC into rigid pipe and tubing were up more than 7 percent in the first half, while sales of the material into extruded windows and doors jumped almost 20 percent.
Regional PE prices were flat for the third consecutive month in July after rising an average of 4 cents per pound in April. PE prices stayed the same even though crude oil prices tumbled more than 15 percent from $48 per barrel to less than $40 during the month. Oil is a global price setter for PE, although natural gas is the most common PE feedstock in North America.
U.S./Canadian high density PE sales grew a solid 3.5 percent for the half, as export sales growth of 21 percent magnified domestic sales growth of around 1 percent. Among large domestic end markets, sales of HDPE into sheet were up more than 4 percent, while sales of the material into injection molded pails were up more than 6 percent.
“We generally expected domestic growth to be in line with U.S. GDP growth, which was 1 percent,” an executive with one HDPE maker said of first-half results. “Organic growth clearly has been conservative, but our customers seem healthy, especially in the packaging space.”
First-half sales for low and linear low density PE were not as uplifting. Regional sales of LDPE were up less than 1 percent, while LLDPE sales were flat.
LDPE sales grew almost 2 percent in the domestic market, but that rate was weakened by a 2.5 percent drop in export sales. LDPE sales into shrink film in the domestic market grew just over 3 percent for the half.
In the LLDPE market, sales into both the domestic and export sectors essentially were flat in the first half. Domestic LLDPE sales into food packaging film and shrink/stretch film showed signs of strength, growing 4 percent and almost 5 percent, respectively.
North American PET bottle resin prices also were flat for a third straight month in July. Prices for the material haven't moved since climbing 2 cents per pound in April. The PET market now is moving out of its high-demand summer period, when warmer weather improves seasonal demand for bottled water and carbonated soft drinks. Lower demand, in turn, could make it more difficult for PET makers to push through additional price hikes.