Hurricane season is hitting hard at resin prices

Three of five major commodity resins saw price hikes in August, but more increases could be on the way as the industry deals with the fallout of Hurricane Harvey.

The most immediate impact of the storm was the pushing through of a 3-cent-per-pound polyethylene increase that was thought to be unsuccessful for the month. But Harvey's Aug. 25 arrival, and subsequent rains and flooding, took down most of the region's PE capacity, which still is working to come back on in mid-September.

Those outages tightened PE supplies and allowed the hike to take hold. Prior to that, regional PE prices had been flat for two straight months after rising 3 cents in May. Regional PE makers now are seeking hikes of 4 cents effective Oct. 1. Many resin makers also continue to operate under force majeure sales limits.

Although resin and feedstock plants are reporting only isolated production problems, more concern is centering on transportation and deliveries. The IHS Markit consulting firm said in a Sept. 13 report that the three major railroads in the area have effectively restored service on their networks, but delays linger.

One resin supplier told Plastics News that the impact of Harvey and of Hurricane Irma, which hit Florida on Sept. 8, has caused "a nationwide shortage of available truck-load and bulk-truck capacity." Road freight demand is returning to Houston, according to IHS Markit, as immediate emergency relief gives way to longer-term rebuilding needs, which is putting more pressure on already rising truck rates.

The most impacted PE production site appears to be Chevron Phillips Chemical's Cedar Bayou plant in Baytown, Texas, which makes high, low and linear low density PE. The PetroChem Wire consulting firm said that site experienced damaging floods as the nearby bayou crested several feet above what is considered a 500-year flood event.

It added that the plant, which makes numerous blow molding and rotational molding grades, is not expected to restart until at least November. Other market sources also told Plastics News that the Cedar Bayou plant had been impacted. Officials with CP Chem in The Woodlands, Texas, declined to comment.

U.S./Canadian PE sales were mixed in the first seven months of 2017, according to the American Chemistry Council. Sales of high density PE in the region were down 3 percent in that period, as a domestic sales gain of almost 4 percent was wiped out by a drop of 26 percent in export sales.

Low density PE sales in the region ticked up 2 percent in those seven months, with a domestic sales drop of 1 percent negated by an export sales gain of more than 11 percent. In linear low, regional sales grew almost 2 percent as domestic growth of more than 4 percent was lowered by a 6 percent drop in export sales.

A polypropylene increase of 0.5 cents for August was the second consecutive hike by that amount. Prices for the material had been flat in June after sliding down 7.5 cents in May and 6 cents in April.

Regional PP production also was mostly down after the storm, but soon recovered. Many units, however, may have difficulty sourcing propylene monomer feedstock. Polymer-grade propylene prices already are up 7 cents for September, leading market watchers to expect some level of increase for PP as well.

North American PP sales were not robust in the first seven months of 2017, increasing almost 1 percent vs. the same period in 2016. Domestic PP sales grew 2 percent in that period, while export sales slipped 27 percent.

The 2.5-cent PET increase for August followed a 1.5-cent hike in July. Both moves were the result of tighter supplies and slightly higher feedstock costs, according to market watchers contacted by Plastics News.

Prices for PET bottle resin now have increased for three straight months, including a 0.5 percent rise in June. Prior to that, prices had declined for three straight months, totaling 3.5 cents in decreases.

Both the PP and PET price increases were in place for August before the storm hit.

Regional PVC and polystyrene resin prices were flat for August, but that could be changing in September and October. PVC makers are attempting to raise prices by 5 cents per pound Oct. 1, with PS makers trying a 3-cent move Sept. 1.

PVC production and feedstocks were more affected by the storm than those in PS, although some production of PS feedstock benzene was impacted.

Regional PVC prices in August were flat for the fifth consecutive month. This flat spell followed a two-month stretch in which prices increased a total of 6 cents per pound.

U.S./Canadian PVC sales in the first seven months of 2017 were up more than 1 percent. Domestic sales grew more than 3 percent but were eclipsed by an export sales drop that also was more than 3 percent.

PS prices in North America were flat in August after tumbling 4 cents in July and being flat in June. The July dip marked the third time in four months that regional PS prices had declined.

The July PS slide was tied to a 20-cent drop in price for benzene feedstock, which is used to make styrene monomer. Benzene prices moved down only 2 cents in August, which wasn't enough to move PS resin prices.

North American PS sales fell almost 1 percent in the first seven months of 2017. A domestic sales loss of more than 1 percent was softened a bit by a boost of 17 percent in export sales.