After an uneventful July, North American resin markets became active again in August, with prices for polypropylene and solid polystyrene climbing while prices for PET bottle resin fell.
The regional PP resin market was able to end its pricing slide in August, with average selling prices moving up an average of 3.5 cents per pound.
That matches a similar price increase for propylene monomer feedstock. Market sources said propylene supply issues played a role in the resin hike, as did a moderate decline in the amount of imported PP available in North America. Prior to the August increase, regional PP prices had declined for 5 consecutive months, with those decreases totaling 10 cents per pound.
High North American PP prices early in 2016 made the region attractive to foreign resin makers, according to Ashish Chitalia, senior research analyst with the PCI Wood McKenzie consulting firm in Houston.
“High margins and prices justified un-bagging facilities in North America, making it possible to import significant volume of polypropylene into a region that's dominated by railcar transportation for polymers,” he said in an email.
For example, Chitalia added, the U.S. in March imported as much as 11.5 percent of its domestic PP consumption. To put this in perspective, monthly import volumes in early 2016 were as much as quarterly imports were in 2013.
The increase in imports then led to an overall increase in inventory levels in the region, Chitalia said, prompting “an aggressive price reduction” by domestic integrated PP makers. “This was the strategy to keep imports away from North America and control inventory levels,” he explained.
In the last few months, lower North American PP prices and global maintenance turnarounds combined to reduce imports from the levels achieved earlier in the year. Those low prices, in turn, triggered an increase in domestic demand, allowing PP prices to increase.
“This time, though, polypropylene producers will be wary of a looming threat from an over-supplied market, which can fill up inventory quickly,” Chitalia said. “Recent increases in prices indicate a ‘full circle' and hopefully allowed producers to test the waters on how far they can go with margin expansion while keeping large volume imports at bay.”
North American PP demand grew only 0.5 percent in the first 7 months of 2016, according to the American Chemistry Council in Washington. Domestic sales were flat, but the overall market was lifted by a 24 percent jump in export sales.
Among major end markets, sales of PP into injection molded caps and closures were strong through July, growing almost 3 percent. Sales of the material into sheet also remained solid in that period, increasing by more than 4 percent.
Regional selling prices for solid PS resin also increased in August, bouncing up an average of 2 cents per pound. That increase was tied to a jump in prices of benzene feedstock, which is used to make styrene monomer. Benzene prices for August were up 17 cents to $2.29 per gallon, a hike of 8 percent vs. the prior month.
The August increase basically cancels out a 2 cent drop that hit the PS market in June. Prices for the material had been flat in July.
North American PS sales through July were down 2 percent compared to the same period in 2015. Sales of the material into food packaging and food service were up less than 1 percent, while sales into the electrical/electronic end market jumped almost 3 percent.
“Growth in food service applications is not surprising as polystyrene characteristics like processability, expandability, and rigidity continue to support its use in this traditional stronghold,” said Brad Crocker, president of PS maker Americas Styrenics in The Woodlands. Texas. “When you couple this with the inherent benefits coming from the low crude environment, polystyrene remains both the economical and value-added choice.”
Crocker added in an email that PS growth in the electrical/electronic segment “likely has more to do with North American production advantages around energy and workforce efficiency than polymer selection.” He also said that ease of processing “is clearly a significant advantage for polystyrene in this high throughput segment.”
Americas Styrenics is continuing to invest in PolyRenew, its 25 percent post-consumer-recycled product. The firm also remains focused on chemical recycling of plastic back into plastic, Crocker said.
Regional prices for PET bottle resin went in a different direction than PP and PS in August. Prices for the material fell by an average of 1 cent per pound, due in part to a drop in prices for paraxylene feedstock.
The PET price drop ends a run of three straight months in which prices for the material were flat. Regional PET prices hadn't moved since climbing 2 cents per pound in April.
Recent news from Niagara Bottling LLC of Ontario, California, should have a positive impact on future North American PET demand. The firm announced that it's adding new water bottling plants in Virginia and Connecticut this year.
In Virginia, Niagara is investing $95 million in a new manufacturing operation in Chesterfield County. The investment is expected to create 76 new jobs. The Connecticut project is a new $57 million plant in Bloomfield. That site is expected to be ready in November.
Both new Niagara buildings are reported to be in excess of 400,000 square feet. The firm makes a variety of PET bottles with high density polyethylene caps.
