June commodity prices calm as only PP, PET up

June was a relatively quiet month for North American commodity resin pricing, with only polypropylene and PET bottle resin seeing any changes.

Regional PP prices surged 8 cents per pound in June after moving up 7 cents in May. That followed a two-month period in March-April when prices slipped a total of 7 cents.

The 8-cent June jump for PP matched similar price hikes for polymer-grade propylene feedstock, meaning PP makers were unable to increase their profit margins for the month, according to David Barry, a market analyst with PetroChem Wire in Houston.

"The monomer price increase was driven by transient supply issues, which were magnified by the fact that ethane, which yields less propylene, is the favored cracker feedstock," Barry said.

"I think we're likely to see some giveback on propylene in the July-August period, but a lot will depend on whether the PDH [propylene] operators can maintain good rates," he added. "There are a number of wild cards in the outlook — trade policy, crude oil prices and hurricanes — but the prevailing sentiment among buyers is that PP prices have limited upside risk from here."

Larger exports of propylene out of North America also have impacted the PP resin market, according to Scott Newell, a market analyst with Resin Technology Inc. in Fort Worth, Texas.

"Propylene exports are moving out the door at a pace of 1.2 billion pounds," Newell said in an email. "Add to that several planned and unplanned outages this year [and] the ability to export propylene is leaving the U.S. without any supply cushion. Any supply disruption leaves the market vulnerable to further volatility."

Regional PP prices now are up a net of 11 cents per pound for the year. Total price volatility for the material — including all increase and decreases — has reached 40 cents per pound.

North American PP sales through May were up almost 2 percent vs. the same period in 2017, according to the American Chemistry Council. A domestic sales increase of just over 2 percent was dampened by a reduction of almost 15 percent for sales into the export market.

Regional PET bottle resin prices also bumped up an average of 3 cents per pound in June after moving up 2 cents in May. PET market analyst Mark Kallman of RTI said that the June increase took hold even though feedstock costs were down slightly.

"Lower crude oil and improved supplies are helping PET feedstocks, but bullish forces … are supporting higher PET prices from the market perspective," he explained.

North American prices for all grades of polyethylene resin were flat in June. Prices for linear low density PE had slipped by 3 cents per pound in May. Prices for high density and low density PE now have been flat for three consecutive months.

U.S./Canadian PE sales were mostly positive through April, as the impact of new production capacity throughout North America began to be seen. Regional sales of HDPE surged up almost 9 percent, with LLDPE sales soaring almost 14 percent. But sales of LDPE have essentially been flat.

For HDPE, domestic sales growth of almost 8 percent was augmented by export growth of 13.5 percent. Domestic HDPE sales growth in that period was boosted by a gain of almost 18 percent for sales into pipe and conduit.

In LLDPE, exports boomed more than 52 percent in the four-month period, boosting domestic sales that grew more than 3 percent. Domestic LLDPE sales into injection molding grew 4.5 percent in the three-month period.

Domestic LDPE sales were flat in early 2018, while export sales dipped almost 2 percent. In spite of flat overall sales, the amount of LDPE sold into extrusion coating outside of paperboard jumped almost 10 percent for the four months.

Regional solid polystyrene prices were flat in June after falling 4 cents per pound in May. North American PS sales slumped 5.5 percent in the first five months of 2018. A domestic sales loss of more than 6 percent was softened by a 24 percent surge in export sales.

Regional suspension PVC prices were flat for the second straight month in June after moving down an average of 2 cents in April. U.S./Canadian PVC sales grew almost 7 percent through May, with export growth of 20 percent adding to an increase of almost 1 percent in domestic sales. Five-month PVC sales into extruded windows and doors were up almost 28 percent.

At the macro-feedstock level, U.S. prices for West Texas Intermediate crude oil surged from $66 per barrel at the start of June to $74 by the end of the month for a gain of 12 percent. U.S. natural gas prices went the other direction, starting June at $2.98 per million British thermal units, but sliding to $2.87 by the end of the month for a decline of almost 4 percent.