Resin pricing changes abundant in a short February

February may be the shortest month, but it was a busy one for commodity resin pricing.

Regional prices for polyethylene, PVC, solid polystyrene and PET bottle resin all finished higher for the month, while polypropylene took a dive.

Prices for all grades of PE were up 4 cents per pound in February, with PVC up 3 cents and solid PS and PET bottle resin each up an average of 2 cents, according to market sources contacted by Plastics News. The PP dip averaged 6 cents per pound.

The price increases played out against a larger market picture of higher global oil prices and a weaker U.S. dollar, according to Phil Karig, managing director of Mathelin Bay Associates in St. Louis. Since early March 2017, Brent crude oil prices are up about 14 percent, while the dollar has depreciated about 15 percent vs. the euro.

“There are always other impacts on resin pricing such as capacity utilization and anticipated growth of the market locally and globally,” Karig said. “But crude oil prices are the backdrop against which other price influences in the resin market play out against over time.”

Looking forward, he added, depreciation of the dollar is likely to stall for a time as the U.S. Federal Reserve starts raising interest rates more aggressively, which should put a ceiling on crude oil price increases and decrease upward pressure on resin prices.

Longer-term, though, if U.S. budget deficits continue to expand, inflation-driven impacts of oil prices on resin prices “will begin to pick up speed,” Karig said.

The 4-cent PE hike came after lower demand had sent prices down 3 cents in January. Prices for all grades of high, low and linear low density PE had been flat in November and December.

The February PE increase “was supplier driven more than anything,” said Mike Burns, a market analyst with Resin Technology Inc. in Fort Worth, Texas. He added that higher raw material prices played a role in the move, as well some production issues and higher export sales.

Market analyst David Barry with PetroChem Wire in Houston sees the February PE increases as “a short-term move.”

“The cold snap in January had a larger impact on PE operating rates than people thought,” he said in an email to Plastics News. The market has seen a number of non-weather-related force majeure declarations as well, Barry added, at assets operated by at least five PE makers.

“All of these production events are winding down as we get into March, so it's likely to be a month for suppliers to play catch-up and to possibly get more active on the export front,” he said. “The new plants have had little impact on the domestic supply balance that I can see, so I would imagine that most of that new output is going offshore.”

U.S./Canadian PE sales got off to a mixed start in January, according to the American Chemistry Council. Regional sales of HDPE were up almost 4 percent, with LLDPE sales rising 7.5 percent. But sales of LDPE had a rough month, slipping almost 9 percent.

For HDPE, domestic sales growth of 4 percent was dampened slightly by 2.5 percent export growth. In LLDPE, exports boomed 33 percent in January — fueled by new capacity added in 2017 — boosting domestic sales growth of almost 1 percent. LDPE's 6 percent domestic sales drop in January was worsened by a 17 percent plunge in export sales.

The 3-cent hike for PVC happened after prices were flat in January and down a penny in December. It took hold as a result of a stronger export market and because of limited production at some PVC plants in the region, according to an executive at a PVC maker contacted by Plastics News.

“There were some [production] issues associated with the hard freeze in the Houston area,” the executive said. “That pushed operating rates under 80 percent. Exports were also up in price, which tightened supplies for the domestic market.”

U.S./Canadian PVC sales grew just over 2 percent in January, with export growth of 14 percent making up for a 3.5 percent decline in domestic sales. January PVC sales into its flagship rigid pipe and tubing end market were down almost 8 percent, as extreme winter weather slowed construction activity.

Regional PS prices climbed 2 cents after being flat in January, but up 5 in December. That topsy-turvy pattern has been dictated by changes in raw material prices. PS makers had been seeking price hikes ranging from 2 to 7 cents per pound for February.

Barry at PCW said the February PS move was influenced by tight supplies of styrene monomer. Higher butadiene prices also put pressure on prices for high-impact PS. By comparison, prices for benzene feedstock, which has been a main driver of PS prices in recent years, have been relatively stable, he said.

Regional PS makers in 2018 are looking to rebound from a 2017 year in which sales fell just over 2 percent. A domestic sales loss of more than 2 percent for full-year 2017 was softened by a gain of 5.5 percent in exports.

The 2-cent price hike seen by PET in February extended that material's streak to nine consecutive months of price increases. Most PET buyers have seen increases of 13 cents since September.

PET bottle resin prices in the region have remained a bit tight in the wake of M&G Polymers' bankruptcy-related shutdown of its 800 million-pound-capacity plant in Apple Grove, W. Va. That plant now has been purchased by Far East New Century Corp. of Taiwan and is expected to restart, which would improve supplies for the regional market.

However, market sources have said that when the Apple Grove PET plant restarts, it may devote some of its capacity to types of PET other than bottle resin.

Month-to-month volatility in PP pricing is almost a given. The 6-cent drop came after a 9-cent jump in January had been caused by short-term supply tightness, as cold weather griped the Houston area. Supplies of both PP resin and propylene monomer were tight.

Prior to the February slide, North American PP prices had increased for seven consecutive months, with those increases totaling 19.5 cents per pound. Higher domestic demand combined with supply outages had played a role in these price hikes.

“The market wasn't supporting the level that prices were rising to,” RTI market analyst Scott Newell said. “That resulted in significant demand destruction across the propylene chain.” A similar price decline is possible for March, he added.

The plant issues that were helping drive propylene price volatility have mostly been resolved, according to Barry at PCW. Demand for derivatives, including PP resins, was likely weaker in February, he added, so propylene “is in the midst of a correction right now.”

“It could be that PP producers will try to find a price floor in March and rebuild from there,” Barry explained. “They've been successful at keeping the market balanced to tight — not making any more resin than they have orders for.”

As a result, he added, there has not been much spot availability for domestic or international markets, although Barry “suspects that PP export activity could pick up this month.”

North American PP sales got off to a rough start in 2018, dropping 4 percent in January. A domestic sales loss of almost 3 percent was magnified by a 46 percent drop in export sales.