North American polypropylene resin prices slipped for the second straight month in May, while prices for polyethylene resin also decreased after a flat month.
The PP drop averaged 7.5 cents per pound, market sources said. Prices for the material had dropped 6 cents in April. This two-month, 13.5-cent decline comes after prices rose an average of 20.5 cents in the first three months of the year.
North American PP sales haven't been strong in the first four months of 2017, dropping more than 1 percent vs. the same period in 2016, according to the American Chemistry Council in Washington. Domestic PP sales fell almost 2 percent in that period, while export sales jumped 21 percent.
Plastics News initially showed the April PP decline as 5.5 cents, but this week is adjusting that total to 6 to reflect an additional half-cent in price erosion from that month.
Looking ahead, PP prices are likely to fall, reflecting lower propylene monomer prices but the margins will still be strong, according to Robert Bauman, a market analyst with Polyolefins Consulting International in Spring, Texas.
He added in an email that in 2018, the impact of low propylene prices "will have taken its course and I expect PP prices to increase, reflecting tight polymer supply."
"This will last until new polypropylene capacity starts up, which could be in 2019 if companies move forward with expansions this year," Bauman said.
At the PetroChem Wire consulting firm in Houston, market analyst David Barry said that "there are growing signs that the [PP] price downtrend of the past 2-3 months is ending."
"Prime direct sales volumes have increased this month and were expected to remain strong in June," he added in an email. "But secondary market activity was viewed as sluggish."
A 3-cent PE drop for May came after prices had been flat in April and wiped out a 3-cent hike that had taken hold in March. "All the drivers that influenced the first quarter increases have been reversed in April and May," market analyst Mike Burns said in a May 30 email.
Burns, who is with Resin Technology Inc. in Fort Worth, Texas, said PE export volumes were back to average in May and North American processors had built 360 million pounds of inventory. Production disruptions also have been resolved, he added, and there was little or no pre-buying from announced increases.
The regional PE market also is under pressure from low-priced finished PE bags coming in from China, Burns said.
As in the PP market, regional sales of PE weren't robust in early 2017. U.S./Canadian sales of high density PE were down almost 6 percent in the first four months of the year, as a domestic sales gain of 1.5 percent was wiped out by a drop of almost 30 percent in export sales.
Low density PE sales in the region slipped almost 1 percent in that period, with a domestic sales drop of more than 2 percent lessened by an export sales gain of almost 4 percent. In linear LDPE, regional sales grew almost 1 percent, as domestic growth of almost 4 percent was lowered by a 9 percent drop in export sales.
Those low PE sales results might be cause for concern, according to Bauman at PCI.
"I've been very conservative on demand growth of about 2 percent for polyethylene from 2015 to 2020," he said in an email. "Even at 3 percent, the business will be in trouble with the surge in PE capacity coming on stream during the next 24 months."
Bauman added that there will be downward pressure on PE prices because of oversupply for both PE and ethylene feedstock and because of low domestic demand growth. Several suppliers are adding PE capacity throughout North America because of newfound supplies of low-priced natural gas feedstock.
"Customers may elect to draw down inventory in anticipation of lower prices when the first two or three crackers start up from Dow, Chevron Phillips or ExxonMobil slated for this year," he said. "As such, sales will be lower than anticipated until he plants start up."
PCW's Barry said that domestic PE demand was said to be on par with April, which overall was a weak month, and that May export volumes "appeared to be below average."
In PE feedstocks, West Texas Intermediate crude oil prices began May around $49 per barrel and were at $49.50 in late trading May 30, for a gain of only 1 percent. Regional prices for natural gas — used as a feedstock in most North American PE — started the month at $3.30 per million BTUs but were at $3.15 in late trading May 30 for a decline of 4.5 percent.