Summer temperatures caused North American selling prices for major commodity resins to melt in June.
Prices for polyethylene, polypropylene, PVC, polystyrene and PET resins all declined for the month, as demand growth slowed and inventories grew.
PE prices were down an average of 3 cents per pound for the month, according to market sources contacted by Plastics News. Prices had been flat for the previous two months. PE prices now are up a net of 3 cents so far in 2023.
"Spot [PE resin] prices have been softening for two months already, reacting to increasing inventory levels at the producer's side," said Esteban Sagel, Principal with Chemical & Polymer Market Consultants in Houston. "It's only logical that, by now, [resin] contract prices should start reflecting that reality."
PE producers and buyers have been battling back and forth for much of 2023. Buyers were able to fight off a 5-cent price hike in April, while producers were able to stop an anticipated 3-cent drop in May. Concerns over lower demand amid economic uncertainty and over potential global oversupply of PE resin have been affecting decision-makers in the PE market.
North American PP resin prices declined by an average of 4 cents per pound in June, matching a price drop seen for polymer-grade propylene [PGP] feedstock. PP prices had been down 8 cents in May and 11 cents in April — again matching PGP — after increasing a total of 27 cents in the first three months of 2023.
"Spot and contract PP have both shown significant decreases in the last two months," Sagel said. He added that some PP production issues and higher spot PGP activity likely prevented contract PP prices from going lower in June.
PP makers that aren't integrated into a PDH unit or a steam cracker "need to push the pricing of PP higher or pull back on PGP buying at these price levels," officials with New York-based PP supplier Blue Clover LLC said in a market update. They added that because of the current market situation, recent PP operating rates have been around 75 percent.
"While domestic demand for PP has improved from previous months … it seems to be more a function of buyers not wanting to miss out at these price points than a need for material because of strong consumer demand into big-box retailers," Blue Clover added.
PP prices now are up a net of 4 cents for 2023.
Regional PVC prices declined an average of 2 cents in June. Prices also had been down 2 cents in May after being flat for two consecutive months. Prices for PVC now are down a net of 2 cents so far this year.
PVC demand remained soft in June, even as producers struggled with production issues. One market source told PN that U.S./Canadian PVC production in May was running at less than 65 percent of nameplate capacity.
Residential construction in the U.S. has slowed as interest rates have increased. That's impacted PVC, since the construction market accounts for more than half of PVC demand. U.S. housing starts for May came in at an annualized rate of 1.49 million. That number was up almost 5 percent vs. April, but down almost 13 percent vs. the same month in 2022.
In the PS market, prices slid 3 cents in June after gaining 2 cents in May. Those moves were connected to fluctuations in price for benzene feedstock, which is used to make styrene monomer. Benzene prices were down 36 cents to $3.55 per gallon in June. That represents a drop of more than 9 percent. North American benzene prices now are up a total of 48 cents so far in 2023.
"There's plenty of PS supply relative to current demand, so producers are probably being flexible on pricing," said David Barry, a market analyst with PetroChem Wire in Houston.
Market analyst Phil Karig said that although not every resin type has the same underlying market dynamics, "just about all of them" are impacted by the direction of oil prices. Karig, the principal with Mathelin Bay Associates in St. Louis, pointed out that in the last 12 months, U.S. crude oil prices have trended down from more than $110 per barrel to less than $70.
"Some resin buyers … may be sitting on the sidelines waiting for resin prices to fall," he added.
North American PET bottle resin prices declined an average of 2 cents per pound in June after being down by that same amount in May. Prices had ticked up 1 cent in April because of higher feedstock costs. Regional PET prices now are down a net of 1 cent so far in 2023.
Demand for the material has been less than expected, even as warmer weather increases consumption of bottled water and carbonated soft drinks, two major PET end markets.
First-quarter imports of PET into the U.S. totaled about 420 million pounds, down 25 percent vs. the same quarter in 2022, according to a recent report from market analyst Gareth Lamb with global trading firm Czarnikow in London. Lamb said those totals have been down for three consecutive quarters as demand has weakened.
"Macroeconomic concerns, including persistently high inflation and increased interest rates, have meant most [PET] buyers have destocked, running on minimal inventories," he added.
Globally, the PET market will be affected by massive capacity expansions in China. Lamb said China added almost 4.1 billion pounds of PET production capacity in the second quarter. In spite of a weak market environment, that country is scheduled to add around 4.7 billion more pounds in the second half of the year.
In recycled resin markets, North American prices for recycled high density PE pellets declined in the second quarter. On average, recycled HDPE resin prices were down an average of 15 cents per pound for the quarter, according to market sources in discussion with PN.
Natural post-consumer pellets were down 24 cents, mixed color post-consumer pellets declined 15 cents and mixed colors industrial pellets dropped by 8 cents.
"These are challenging times," a materials supplier in the Southeast U.S. said. "The whole dynamic of the market has changed, probably from a year ago."
In feedstocks, West Texas Intermediate oil prices opened June at $68.10 per barrel but had climbed to $70.65 by the end of the month, an increase of almost 4 percent. Markets for natural gas — used as a feedstock to make PE and PVC — have been lower than expected for much of 2023 because of warmer winter weather and high supply levels. Prices started June at $2.27 per million British thermal units but were up more than 23 percent by the end of the month to close at $2.80.