PE, PS prices spring up in April, PET slides

Polyethylene provided the most drama in commodity resin markets for April, as North American PE makers needed considerable effort to push through a 3-cent-per-pound price increase.

Regional prices for solid polystyrene were up for the month, PET bottle resin was down 1 cent and polypropylene was surprisingly flat. Final April prices for PVC resin were still being negotiated as of May 15.

Regional prices for all PE grades had been flat for the first three months of 2019, as buyers were able to ward off a 6-cent hike that major PE makers first announced for Jan. 1. Market watchers had thought that 3 cents of the 6 cents would take hold in February, but market fundamentals did not support that move and buyers were able to resist the increase before it finally took hold late in the month, market sources told Plastics News.

PE prices had slid 3 cents in both November and December. Market watchers cited lower oil prices and lower global demand, especially from packaging. Oil prices affect global resin markets, even though most North American PE is made from natural gas.

West Texas Intermediate crude oil prices began 2019 around $48 per barrel but were near $61.50 in early trading May 2 for an increase of more than 28 percent. Prices were near $62.30 on May 15.

The challenge facing the global PE market is an overly abundant supply of material, according to Mike Burns, a PE market analyst with Resin Technology Inc. in Fort Worth, Texas.

"Oil prices are at a six-month high, but ethylene [feedstock] prices are at a four-month low," Burns said May 2. "The bottom line is there's too much resin right now."

Global PE demand "is very good, but [PE] resin prices have been lower than expected because of new supply," he added.

Many North American PE makers have added capacity in recent years to capitalize on newfound supplies of natural gas in the region. Much of this new supply has been tagged for export markets, although domestic PE demand has remained solid.

On a global basis, North American PE makers are being impacted by tariff-based challenges in selling excess material into China, according to a recent blog post from John Richardson of the ICIS consulting firm in London.

U.S. LLDPE exports to China are down 53 percent so far in 2019.

"Eleven years ago, the U.S. would have been under less pressure to make compromises in the trade war that has led to a sharp fall in its LLDPE exports to China," Richardson wrote. "But in 2009, China became the world's biggest consumer by volume of LLDPE, overtaking the U.S. and the [European Union]."

U.S. LLDPE exports to China have fallen very steeply since September 2018 following the imposition of 25 percent duties by China as part of the trade war," he added. "This is terrible timing for the U.S. LLDPE industry because it is undergoing a big wave of capacity expansions," Richardson wrote, adding that China's dominant position as the world's biggest consumer and importer of energy, petrochemicals and agricultural products "gives it strong leverage in trade talks."

North American solid PS prices also moved up in April, increasing by an average of 4 cents per pound, according to sources contacted by Plastics News. That move was prompted by a rise in prices of benzene feedstock, which is used to make styrene monomer.

Benzene prices for April were up 23 cents to $2.25 per gallon. The PS hike is the second consecutive monthly increase for the material. Prices in March had moved up an average of 2 cents per pound.

PS maker Trinseo of Berwyn, Pa., reported that its global PS sales were down 5 percent to $228 million in the first quarter of 2019. Officials said that the decline was mainly due to pass-through pricing, which was partially offset by higher sales from customer restocking and more favorable market conditions.

Regional prices for PET bottle resin declined by an average of 1 cent per pound since April 1. PET prices were affected by prices for related feedstocks, including paraxylene and PTA, sources said.

The 1-cent decline for PET in April erases a 1-cent gain that prices had shown in March. Prices for the material also had been up 1 cent in February after declining by 1 cent in December.

The net result of these moves is that PET prices are up only 1 cent per pound since Jan. 1.

Global PET maker Indorama Ventures of Thailand reported that its first-quarter combined production volumes for virgin PET, recycled PET and paraxylene and PTA feedstocks were up almost 40 percent. First-quarter operating rates for those materials checked in at 88 percent.