2017 starts with resin pricing volatility

If processors buying polypropylene, solid polystyrene or PET bottle resin were hoping for a calm start to 2017, they soon had to change those plans.

North American prices for PP surged 10 cents per pound in January, as polymer-grade propylene feedstock was in tight supply. That move was a sharp reversal from a combined 11.5 cents in price drops that market had seen in the last three months of 2016.

The PetroChem Wire consulting firm in Houston said that propylene prices in December did not reflect a tight market, because the situation was masked by year-end destocking. When demand resurfaced in January, propylene buyers found they had to pay dramatically higher prices.

PetroChem Wire added that the run-up in propylene costs caught PP buyers off guard and caused some to lower their order volumes for January. North American PP sales ticked up 0.4 percent for the year to almost 17.3 billion pounds, according to the American Chemistry Council. Domestic sales fell 2.5 percent, with exports surging up 114.8 percent.

Regional PS prices also jumped up an average of 5 cents per pound in January. That hike wasn't completely unexpected, as prices for benzene feedstock had climbed for two straight months. North American benzene prices shot up 33 cents to $2.67 per gallon. Prices for that material also had increased 11 cents in December, but the market couldn't settle on an increase amount for PS resin.

As a result, regional PS prices were flat in December. PS prices in the region had fallen 2 cents per pound in November after being flat in October. Several factors have caused benzene prices to move up by almost 20 percent in the last two months, according to Robin Chesshier, a market analyst with Resin Technology Inc. in Fort Worth, Texas.

Those reasons include tight supplies, lack of imports, stronger demand, pull from higher prices in other regions and a move from oil-based naphtha back to natural gas-based ethane as a precursor. Ethane produces less benzene per unit than naphtha does.

PS maker Americas Styrenics LLC now is seeking an increase of 8 cents per pound effective Feb. 1. North American PS sales for full-year 2016 essentially were flat at just under 4.4 billion pounds, according to ACC.

North American PET bottle resin prices also were up in January, climbing an average of 3 cents per pound. That marked the fifth consecutive monthly price increase for the material.

Higher feedstock prices were cited as reasons for the increase by market watchers contacted by Plastics News. Regional PET prices had increased by 2 cents per pound in December after absorbing 1-cent increases in each of the previous three months.

The late-year hikes surprised some market watchers, as bottle resin demand typically declines in winter months, along with sales in its leading bottled water and carbonated soft drink (CSD) end markets. Processors now may be stocking up on material in advance of warmer summer months.

Bottled water overtook soda in U.S. consumption for the first time in 2016, according to the Beverage Marketing Corp. consulting firm. Bottled water accounted for 20.5 percent of the overall U.S. beverage market last year, according to BMC, almost a full percentage point ahead of CSD at 19.8 percent.

For the year, bottled water consumption grew 8.5 percent, while soda consumption dropped 1.7 percent. Overall, plastic accounted for 41.2 percent of all beverage packaging units in 2016, up from 36.5 percent in 2012.

Regional prices for polyethylene and PVC resins were flat in January, but market watchers said there's a good chance that prices for both materials will be higher in February, mainly as a result of higher prices for ethylene feedstock.

Net price changes for full-year 2016 showed North American PVC prices up an average of 7 cents per pound and prices for all grades of high density, low density and linear low density PE up an average of 4 cents per pound.

In the engineering resins market, North American prices for nylon resins are under upward pressure. BASF SE has announced increases of 28 cents per pound for nylon 6 resins since Jan. 1. The firm also planned to increase prices for compounds based on those materials by 7 cents per pound on Jan. 30.

Solvay Group and DuPont Co. also have announced global price increases of 13-15 cents per pound for their nylon resins and compounds. In a news release, Solvay officials said that the dramatic rise of raw materials costs is affecting the entire nylon value chain.

DuPont officials added in a news release that the increases “are needed as a result of rapidly rising costs of certain key raw materials.” One market watcher said the BASF price move was “too aggressive” and that the firm already was seeing “market pushback.”

North American nylon 6 resin prices already had climbed an average of 10 cents per pound since August, due in part to tightness of caprolactam feedstock. BASF in September announced plans to remove more than 200 million pounds of annual caprolactam production in Europe by early 2018. Higher benzene prices also are putting upward price pressure on nylon resins, market watchers said.