Summer vacation started early for North American commodity plastics, with prices for most of those resins dropping in May.
North American prices for polypropylene, polyethylene, polystyrene and PET bottle resin each were down for the month. PP prices were down 7.5 cents, with PE down 3, PS down 2 and PET down 1.
The 7.5-cent PP decline came after prices for the material had dropped 6 cents in April. This two-month, 13.5-cent downturn 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, slipping more than 1 percent vs. the same period in 2016, according to the American Chemistry Council. Domestic PP sales fell almost 2 percent in that period, while export sales jumped 21 percent.
Looking ahead, PP prices are likely to continue to fall, reflecting lower propylene monomer prices, but profit margins will still be strong, according to Robert Bauman, a market analyst with Polyolefins Consulting International in Spring, Texas.
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."
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's 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."
In PE feedstocks, West Texas Intermediate crude oil prices began May around $49 per barrel and ended the month around $49.50, for a gain of only 1 percent. Regional prices for natural gas — used as a feedstock in most North American PE and PVC — 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.