Issues surrounding feedstocks and demand sent North American prices for polyethylene and polypropylene resins lower in November.
Regional PE prices dipped an average of 3 cents per pound for the month, giving back a price increase that suppliers had won in September. Prices for all grades of PE had been flat in October.
In the PP resin market, prices tumbled an average of 10 cents per pound, following a similar price decrease for polymer-grade propylene feedstock. PP prices had been flat in October after declining an average of 1 cent per pound in September.
Market watchers cited lower oil prices and lower global demand for PE, especially from the packaging market, as a reason for the November drop. West Texas intermediate crude oil prices were near $75 per barrel in early October, but had fallen to $51.40 in early trading Nov. 29. Oil prices affect global resin markets, even though most North American PE is based on natural gas.
The impact of tariffs between the U.S. and China also has been unknown, according to Mike Burns, a PE market analyst with Resin Technology Inc. in Fort Worth, Texas. This uncertainty has affected U.S. PE resin exports to China, as well as imports of finished goods made of PE from China to the U.S., he said.
"July, August and September were the biggest [U.S. PE] export months in history," Burns added. "But now the U.S. hasn't been able to move [PE resin] product as fast as it's wanted."
PE analyst David Barry of PetroChem Wire in Houston added that domestic PE demand "backed off a little" in November, even as U.S. PE exports that had been bound for China were sold into Vietnam and other locations in Asia and Europe instead.
"It's harder to move material at the end of the year, especially if there aren't as many buyers," Barry added. Both Barry and Burns said additional North American PE price drops are possible in December.
The November decline — combined with earlier increases and decreases — leaves most grades of North American PE up a net of 1 cent per pound since January, according to Plastics News data.
U.S./Canadian PE sales have reported robust growth through October, resulting from larger amounts of new capacity being sold into the export market. High density PE sales in the region were up more than 13 percent, with domestic growth of 7 percent amplified by export sales growth of 42 percent.
Regional sales of low density PE jumped more than 4 percent for the nine months, as export sales growth of 19 percent overcame a domestic sales drop of almost 1 percent. In linear low PE, nine-month sales have soared more than 24 percent, with domestic sales up almost 5 percent and export sales exploding more than 96 percent.
In the PP market, the price drop has been linked to larger supplies of propylene monomer.
"New PDH [propylene] units are running at good rates, and some production sites are switching from ethane to naphtha, which is increasing supplies of propylene," Barry said.
The regional PP market also has been impacted in 2018 by increased imports of resin from outside the region. Barry said monthly imports of PP into North America have topped 100 million pounds a few times in 2018 after averaging 60 million to 70 million pounds last year.
Tight North American PP supplies — resulting from several production issues — and low prices for imported resin have drawn buyers to foreign suppliers, he added.
The November PP decrease, combined with earlier price hikes and decreases, leaves North American PP prices up a net of 2 cents per pound since January, according to Plastics News data.
"We've seen some demand destruction of polypropylene resin because of higher prices," said Scott Newell, a PP market analyst with RTI. "And [resin] operating rates have been under 90 percent because the plants can't get monomer."
But Newell said that those situations now are changing, and that lower prices for both resin and monomer could lead to greater domestic demand, and fewer imports, in 2019.
North American PP sales through September were down almost 1 percent, as a drop of almost 33 percent in exports sales brought down flat domestic sales. Market watchers, however, said that actual PP consumption in the region more likely was up 3-4 percent for the year because of increased amounts of imported PP.
Sales from domestic PP suppliers into injection molded caps and closures were up 6 percent in the nine-month period, with sales into the sheet market up just over 4 percent.
