Commodity resin prices take it (relatively) easy in September

September provided a bit of calm for North American commodity resin pricing, with only polyethylene and polypropylene prices moving.

Prices for all grades of high, low and linear low density PE in the regions were up an average of 3 cents per pound in October. Drone attacks on Saudi Arabian oil assets in the Middle East on Sept. 14 didn't have as much of an impact on resin markets as expected, but heavy rains that hit the Houston area on Sept. 18 and 19 were enough to push the 3-cent hike through, sources said.

The rains affected some Houston-area plants operated by ExxonMobil Corp. and LyondellBasell Industries. Although no producer declared force majeure, concerns about supply were enough to push the increase through.

The Sept. 14 drone attacks initially were expected to have a major impact on oil supplies and downstream petrochemicals, but Saudi Aramco — the oil supplier targeted — said it would have most affected capacity up and running by the end of the month. U.S.-based shale oil and gas have also reduced the impact of Middle Eastern supplies on world markets.

The 3-cent PE hike for September "was event-related, not related to feedstocks, inventory, production or anything else," said Mike Burns, a PE market analyst with Resin Technology Inc. in Fort Worth, Texas.

Earlier in September, Burns added, Asian PE prices were at 10-year lows, preventing North American PE from being exported there and filling warehouses in Houston with unsold PE. But demand picked up as a result of some prebuying in August and then because of the Houston weather issues, sending prices up for both domestic and export markets.

The September hike comes after regional PE buyers weathered a confusing summer in which prices fell a total of 6 cents per pound between June and August. Reasons for the decline varied from buyer to buyer, but many said increased supplies of PE in recent years played a role.

PE makers now have announced 8-cent increases for Oct. 1, but market watchers said those moves were made when the impact of the Saudi attacks was expected to be much greater. As a result, the October hike isn't likely to go through at the full amount if it goes through at all, buyers said.

The North American PP market in September saw prices bump up 1 cent per pound, following a similar increase in price for propylene monomer feedstock. Regional prices had been flat in August after moving up 1 cent in July.

Prices for PP had been down 4 cents in June, canceling out a 4-cent price hike from May. Prior to those moves, a series of declines from November through March had sent PP prices tumbling 24.5 cents.

Reduced PP price volatility in recent months is the result of improved supplies of monomer for the region, according to Scott Newell, a PP market analyst with RTI.

"Pricing has been relatively stable since coming down late last year and early this year," he said. Newell added that a July 31 explosion and fire at a major propylene site operated by ExxonMobil in Baytown, Texas, had "minimal impact" on PP pricing.

Even with the September increase, North American PP sales up are up less than 2 percent so far in 2019. Factoring out export sales leaves domestic demand slightly negative for the year, Newell said.

Export sales have more than doubled, but from a small base, adding only 25 million pounds per month to a market that's measured in billions. Regional sales of PP to resellers is also up 20 percent, but Newell said some export and resale deals have been done at "not great prices."

Demand from domestic markets — with the exception of sheet — has been down because of what Newell described as "a soft economy." He added that "businesses are nervous because they don't know where things are going to go, because of the tariffs and other factors."

PP market watchers told Plastics News that slow domestic sales could be more of a concern if they continue into 2020, when PP makers Braskem and Formosa Plastics Corp. USA are expected to add more than 1.5 billion pounds of new capacity at U.S. production sites.

Regional prices for PVC, polystyrene and PET bottle resins were flat in September. PVC prices had ticked down a penny per pound in August after being flat in July. Prices for the material had made a surprising 2-cent increase in June. Construction activity, which drives U.S. demand for the resin, hasn't been overly strong in 2019.

Through June, U.S. housing starts were down more than 4 percent vs. the same period in 2018, according to the U.S. Census Bureau. One PVC market watcher told Plastics News that U.S. PVC exports "are weakening, and the domestic market isn't much ahead of last year when we look at housing and other indicators."

North American solid PS prices were flat for the second consecutive month in September after moving up by an average of 2 cents per pound in July. A minimal September price increase for benzene feedstock — used to make styrene monomer — wasn't enough to move PS prices for the month.

Domestic PS demand showed growth of around 1 percent in the first half of 2019, market watchers said, with gains in consumer products and electrical/electronic applications.

North American PET bottle resin prices were flat in September after sliding down 2 cents in August. Prices had moved up 1 cent in July. Both moves were tied into changes in feedstock prices. The August decrease wasn't surprising, since demand for bottled water and carbonated soft drinks — two major PET end markets — tends to decline as regional weather starts to cool off.

The domestic PET market remains oversupplied, with bottled water usage attempting to make up for ongoing declines in carbonated soft drink demand.

In feedstocks used to make commodity plastics, West Texas Intermediate crude oil prices began September at $53.90 per barrel and were almost unchanged by the end of the month, advancing less than 0.5 percent to $54.10. Oil prices, however, had a one-day surge of almost 15 percent after the Saudi attacks before reverting to their previous range. Regional prices for natural gas declined slightly from $2.36 per million British thermal units to $2.33 in the same comparison for a loss of just over 1 percent.