Commodity resin prices stay heated in July

Most North American commodity resin prices rose for the second straight month in July, as the region made adjustments to life during the COVID-19 pandemic.

Improving demand and higher feedstock costs sent North American prices for polyethylene, polypropylene, solid polystyrene and suspension PVC resins up during the month. Regional prices for PET bottle resin remained flat.

Regional prices for all grades of PE jumped 5 cents per pound in July as strong demand combined with lower output at some locations. PE prices in the region had moved up 4 cents per pound in June. North American PE makers now have a 5-cent increase on the table for August.

"There's strong demand in essential applications," PE market analyst Mike Burns said. "Demand in a lot of areas never went away.

"Now there's a surge in nonessentials as demand is picking up," added Burns, who is with Resin Technology Inc. in Fort Worth, Texas. Export markets opened up in June and July, adding additional strength to PE demand, he said.

Market sources said that even with some COVID-19-related slowdowns earlier in the year, the amount of PE sold into film applications in North America is on track to be slightly higher in 2020 than it was in 2019.

North American PE supplies also have been improved by Dow Inc.'s restart of two units that had been down since early May in response to the COVID-19 pandemic. Two Formosa Plastics Corp. USA PE units in Point Comfort, Texas, remain down for maintenance.

North American PP prices moved up an average of 6 cents per pound in July. Prices had increased by 1 cent in June after being flat in May. The increase was tied to higher prices for polymer-grade propylene monomer.

Market sources also told Plastics News that during the month, several producers — including Dow Inc., Enterprise Products, Total Petrochemicals, Ineos Group and Formosa Plastics Corp. USA — had supply issues on either propylene monomer or PP resin.

"There were some big production outages in July, and inventory was drawn down by 90 million pounds," said Scott Newell, a market analyst with RTI. "The [PP] market felt tighter."

Market sources said that North American PP demand is down 5 percent so far in 2020, due in part to a drop of about one-third in sales to the automotive market. Many global auto plants closed during the COVID-19 outbreak.

Other markets, including exports as well as housewares and caps and closures, have seen improved demand, owing in part to consumers spending more time at home during the pandemic. Medical uses, such as N95 face masks, which are needed to protect health care providers, also have led to increased PP demand.

PP demand "remains very strong, and supply is the tightest it's been in all of 2020," officials with distributor/consultant Blue Clover Polymer Solutions in Princeton, N.J., said in a recent research note. They added that recent PP outages "lasted substantially longer than expected."

The regional PP market could see a smaller price increase in August, although recent swings in PGP prices have led market watchers to believe that's not a done deal.

RTI's Newell described August as "a transition month" for the PP market. "Monomer supplies should come back, and demand might slow down if buyers are just replenishing their inventory," he said. "If that happens, we could see monomer and resin prices coming back down."

North American PP supplies were improved in late June, when Braskem SA completed construction of a new PP resin plant in La Porte, Texas. Officials with São Paulo-based Braskem said that the billion-pound-capacity plant has global export capacity.

The 3-cent jump in PS prices comes after prices moved up 2 cents in June. Regional prices for the material had declined a total of 10 cents in April and May as COVID-19 affected demand.

The July PS price hike followed a large increase for benzene feedstock, which is used to make styrene monomer. Benzene prices moved up 39 cents to $1.38 per gallon during July.

The regional PS market continues to face challenges, according to Phil Karig, managing director with Mathelin Bay Associates in St. Louis. "Unfortunately, nothing about the current COVID-19 situation that has benefited some other polymers will change polystyrene's downward trend," he said.

The 2-cent increase in regional PVC prices for July came after a 3-cent hike took hold in June. Demand for the material has increased as construction markets have begun to recover from COVID-19. Construction-related uses account for around 60 percent of PVC consumption in the U.S. and Canada.

A market source told Plastics News that PVC makers have reduced inventory levels to just over seven days — a relatively low level — which has tightened supply and allowed prices to climb higher.

Regional PET bottle resin prices were flat in July after moving up an average of 1.5 cents per pound in June. Market sources said that increase had more to do with higher raw material prices, as demand for the material had been flat.

Prices for West Texas Intermediate oil began July just over $39 per barrel and improved slightly to climb to little more than $40 by the end of the month for a gain of almost three percent.

Prices for natural gas — used as a feedstock in North American PE and PVC — began July at $1.75 per million British thermal units but improved to $1.83 by the end of the month for a gain of almost 5 percent.