COVID-19 drives commodity resin prices down in April

The impact of COVID-19 was felt in North American commodity resin markets in April, with most materials seeing prices decline.

Economic activity across the region has plummeted as nonessential businesses closed and consumers stayed home as much as possible to prevent the spread of the virus. Major job cuts across many industries also have dampened consumer spending.

On April 29, the U.S. Bureau of Economic Analysis reported that gross domestic product decreased by 4.8 percent in the first quarter. As of May 5, more than 260,000 people have died from COVID-19 around the world.

Regional prices for all grades of polyethylene resin fell an average of 4 cents per pound in April. Rising demand for PE in packaging and medical applications was tempered by demand drops in other sectors, such as construction.

North American PE prices had been flat in March, although producers tried to push a 4-cent hike through. Changing market conditions related to COVID-19 eventually led them to suspend that attempt.

PE supplies will be affected by Dow Inc.'s decision to idle three PE resin plants for at least one month in response to the COVID-19 crisis.

The plants being idled are in Freeport and Seadrift, Texas; and Bahia Blanca, Argentina. Dow also is idling two elastomers plants in Plaquemine, La. In total, the plants represent about 10 percent of Dow's global capacity for those materials.

All of these moves are being made to balance production with demand, officials said. In an email to Plastics News, a Dow spokesperson said that the firm is not announcing layoffs associated with the temporary closings.

Polypropylene prices in the region were down 2 cents per pound in April, mainly as a result of lower demand across several end markets. North American PP prices now have declined for five consecutive months. Those five decreases have lowered prices by a total of 10.5 cents.

The automotive, construction and appliance markets are using less PP as economic uncertainty prompts consumers to delay major purchases. The COVID-19 outbreak is creating higher PP demand for medical uses, such as N95 face masks, which are needed to protect health care providers.

North American PVC prices dropped 5 cents per pound in April after being flat in March. The 5-cent drop wiped out 5 cents in increases that had taken hold in the first two months of the year.

Construction projects have been delayed and new home sales are down as a result of COVID-19. Rigid pipe and other construction applications account for more than half of PVC consumption in the U.S. and Canada.

Market sources said that sales of PVC into windows and doors also are down. Business shutdowns in India — a major importer of U.S. PVC — also have affected demand.

Regional prices for solid polystyrene tumbled an average of 7 cents per pound in April, with some buyers seeing declines of as much as 9 cents. PS maker Americas Styrenics had preannounced a 7-cent price reduction on April 1.

The PS decrease mainly was caused by a massive drop in price for benzene feedstock, which is used to make styrene monomer. Benzene prices plummeted from $2.57 per gallon in March to $1.21 in April, a plunge of almost 53 percent.

North American PS prices had been flat for the fifth consecutive month in March. Regional PS demand had been strong in March, as consumers loaded up on food packaging and foodservice items in advance of the COVID-19 crisis.

North American PET bottle resin prices slid 5 cents in April, as lower oil prices drive down prices for paraxylene and purified terephthalic acid (PTA) feedstocks. Prices for the material had fallen 4 cents in March and now have decreased in five of the last six months, bringing prices down a total of 12 cents.

Although PET demand increases in warmer months with higher beverage consumption, the domestic PET market remains oversupplied.

At Chemical & Polymer Market Consultants in Houston, President Esteban Sagel said that the market "will be in an environment of prolonged low [resin] prices, as a result of the demand shock and sustained and low oil prices."

"I was expecting low prices before COVID and the oil price crisis; those two factors are solidifying my expectation," he added. Resin demand during COVID-19 "is very different, depending on the segment that you are looking at," according to Sagel.

"I have witnessed firsthand the increase in interest in polymers by the medical industry," he said in an email to Plastics News. "Here in Houston … the MD Anderson Cancer Center is urgently working with the polymer industry to create innovative solutions for personal protective equipment [PPE] for its doctors. The need for protection is real, and these newly opened communication avenues between the polymer industry and the medical profession are opening new avenues of business."

Sagel added that besides medical PPE, packaging "is also seeing its day in the sun." The resin demand picture is bleaker for other segments, like automotive, building and construction or appliances.

"I don't believe their woes will end any time soon," Sagel said. "We are still far from a systemic solution against the virus that will allow the economy to come back full steam."

Prices for crude oil, a global price-setter for many commodity resins, also have tumbled, having a downward effect on plastics prices.

At the international level, Brent crude prices began the year at $66 per barrel but were near $31 in late trading May 6 for a decline of 53 percent. In the U.S., prices for West Texas Intermediate (WTI) crude fell from around $61 per barrel to $24.60 in the same comparison for a decline of almost 60 percent.

Prices for natural gas began the year at $2.19 per million British thermal units and fell as low as $1.55 before rallying to $2.13 in late trading May 6, for a decline of less than 3 percent so far in 2020. But the narrowing of the gap between crude oil and natural gas has lowered profit margins for North American resin makers.