A quiet July for North American commodity resins gave way to a more active August, with prices for polypropylene and solid polystyrene climbing while prices for PET bottle resin fell.
The regional PP resin market was able to slam on the brakes in August, ending a five month pricing skid by moving prices up an average of 3.5 cents per pound. That number 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.
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.
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, he added. Those low prices, in turn, triggered an increase in domestic demand, allowing PP prices to increase.
Prior to August, five straight months of PP price drops had lowered prices by a total of 10 cents per pound.
North American PP demand grew only 0.5 percent in the first seven 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.
Solid PS rises
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 PS increase basically cancels out a 2 cent drop that hit the 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 the electrical/electronic end market jumped almost 3 percent.
PS growth in the E/E segment “likely has to do with North American production advantages around energy and workforce efficiency,” according to Brad Crocker, president of PS maker Americas Styrenics in The Woodlands, Texas.
Fall for PET, while PE, PVC are flat
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, Calif., 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. 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.
Regional PE prices were flat for the fourth consecutive month in August. Prices for the material now haven't moved since climbing 4 cents per pound in April. PE prices stayed the same in August even though crude oil prices increased slightly from $41 per barrel to $43 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 PE sales were mixed in the first seven months of 2016. The HDPE market was the strongest, growing just over 3 percent, as export sales growth of almost 11 percent overcame a domestic sales loss of almost 1 percent.
Low and linear low density PE sales results through July in the region were unimpressive, with each material down almost 1 percent. For LDPE, export sales fell almost 8 percent, wiping out a domestic sales gain of more than 1 percent. In the LLDPE market, domestic sales essentially were flat through July, while export sales fell almost 2 percent.
In spite of these mediocre PE sales totals, Dow Chemical Co. executive Karen Carter was optimistic about new PE capacity in a recent interview with Plastics News. “We're very excited about the expansion,” said Carter, who serves as commercial vice president of Dow's packaging and specialty plastics unit. “It will better position us to meet customer demand in the Americas.”
Midland, Mich.-based Dow plans to add more than 2 billion pounds of PE capacity at its petrochemicals complex in Freeport, Texas, by mid-2017. Dow and several other plastics and chemicals firms are adding capacity for PE and for ethylene feedstock as a result of increased supplies of low-priced natural gas throughout North America.
“This is really about population growth,” said Carter, “A rising middle class around the world is increasing demand for packaging. We're seeing polyethylene demand growth at 1.3-times global GDP, which comes out to 4 percent global PE demand growth per year.”
Low domestic PE demand growth can be balanced out by increased export sales, according to Carter, a 22-year Dow veteran. “The North American market is challenging today, but it will recover,” she said. “There will be places for plastics to grow. We're able to export around the world, and the world will absorb this new material.
Dow also “still is seeing customers growing and adding [production] lines ... and some conversion is being repatriated” to North America, she added.
Regional PVC prices were flat for the second consecutive month in July after strong construction activity had sent prices for that material up an average of 2 cents per pound in June. PVC continues to be doing better than any other North American commodity resin in 2016, due in part to a rebound in the U.S. housing market.
Through July, U.S./Canadian PVC sales were up more than 5 percent, with domestic sales growth of almost 5 percent augmented by a 6.5 percent surge in export sales. Sales of the material into its flagship rigid pipe and tubing sector were up more than 7 percent in that period.
The U.S. housing 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 seven months of 2016.