Most North American commodity resin prices melt in May

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.

For PS, the 2-cent May decline was the second consecutive such move. Some buyers reported seeing a 3-cent drop, but most saw the 2-cent decrease, which had been announced by PS maker Americas Styrenics.

PS prices had fallen by 5 cents in April after increasing by 6 cents in March. These moves have been driven by price volatility for benzene feedstock, which is used to make styrene monomer.

North American PS sales are off to a rough start in 2017, falling almost 4 percent through April. Sales of PS into consumer and institutional uses were down almost 10 percent in that period. PS sales into the electrical/electronic sector provided a bright spot, increasing almost 5 percent in those four months.

The 1-cent PET decline for May came as a result of lower feedstock costs and overcame higher demand for bottle resin from the beverage market as warmer weather arrives. Regional prices for the material now have declined for three straight months after slipping a total of 2.5 cents in March and April.

PTA and MEG feedstocks have been under downward pricing pressure, sources said. Prior to March, regional PET prices had increased for six consecutive months, with those increases totaling 9.5 cents per pound.

PVC was the only commodity resin to see flat pricing in North America for May. That marked the second consecutive month that prices for the material hadn't moved, following a total of 6 cents in increases that had taken hold in February-March.

Through April, U.S./Canadian PVC sales were down more than 1 percent. Domestic sales grew more than 1 percent but were eclipsed by an export sales drop of more than 7 percent.

In non-commodity resin markets, regional prices for all grades of polycarbonate resin are up an average of 14 cents per pound since Jan. 1, as a result of higher prices for benzene and other feedstocks. Prices for nylon 6/6 resin in the region have increased an average of 6 cents per pound since March 1, also resulting from higher feedstock costs. Prices for that material already had increased a total of 12 cents per pound on average in January and February.

For recycled resin markets for North America, average selling prices for recycled HDPE are down 4 cents per pound since March 1, with recycled PET bottle resin prices down an average of 2 cents per pound since then as well. Both price decreases are connected to lower demand, market sources said.