A January surprise for polyethylene prices

North American commodity resin markets got off to a surprising start in January, with suspension PVC prices up, polypropylene prices down and polyethylene prices seeing a last-minute hike.

The PE market saw a 4-cent price increase take hold after producers and buyers battled it out for most of the month. PE makers eventually were able to get the increase through, as some major buyers accepted the move and began sending out price increases of their own for PE finished goods.

Market sources said the move was based on PE makers' desire to increase margins after seeing prices fall throughout 2019. Supplies were readily available, even as producers looked to continue to export large amounts of new capacity added in recent years.

North American PE prices were flat in December after declining an average of 3 cents per pound in November. For full-year 2019, PE prices were down a net of 6 cents, according to the Plastics News resin pricing chart.

On the PE capacity front, another 1.8 billion pounds is set to come on line this year from Formosa Plastics Corp. USA. That's on top of almost 4.5 billion pounds added from three suppliers in 2019 and a total of more than 8 billion pounds added from four suppliers in 2017-18.

Looking past 2020, additions of more than 2 billion pounds total are slated for 2021-22. That amount does not include 3.5 billion pounds of capacity from Shell Chemical's massive project outside of Pittsburgh. Company officials have listed "early 2020s" as the start date for commercial production there.

Regional PVC prices increased by an average of 3 cents per pound in January, while PP prices ticked down an average of 1 cent. The PVC move was the result of tighter supplies and of processors building inventories in advance of spring construction.

U.S. construction activity was stronger than expected in late 2019. Rigid pipe and other construction applications account for more than half of PVC consumption in the U.S. and Canada.

Market sources said that U.S./Canadian PVC sales were down around 2 percent in 2019, due in part to early-year softness in some construction sectors, including fencing and decking. Regional PVC prices had relatively few increases and decreases during 2019 and ended up flat for the year. Most recently, prices for the material fell 1 cent in November.

PVC maker Westlake Chemical Corp. added almost 640 million pounds of new annual resin capacity in late 2019. Shintech Inc. and Formosa Plastics Corp. USA are expected to add a total of almost 940 million pounds of annual capacity in 2021.

For PP, the 1-cent January price drop was the result of improved supplies of propylene monomer feedstock and of relatively soft early-year demand. During 2019, North American PP prices declined by a net of 9.5 cents per pound. Most recently, prices for the material declined 2.5 cents in December.

North American PP sales were up less than 2 percent in 2019. Factoring out exports left domestic demand slightly negative for the year. PP maker Braskem is adding just over 1 billion pounds of annual production in La Porte, Texas, in the second quarter of 2020.

Regional prices for solid polystyrene and PET were flat for the month. North American solid PS prices were flat for the second consecutive month in January after falling an average of 3 cents per pound in November. Flat January pricing came as a surprise to some PS market watchers, since prices for benzene feedstock, which is used to make styrene monomer, were up almost 10 percent for the month.

Regional PET prices were flat in January after declining by 1 cent in December. The December decrease owed partly to low seasonal demand. Prices for the material also had fallen 1 cent in November. The domestic PET market remains oversupplied, with bottled water usage attempting to make up for ongoing declines in carbonated soft drink demand.

Resin makers Dow, DuPont Co. and LyondellBasell Industries recently reported full-year financial results for 2019. Dow of Midland, Mich., and Wilmington, Del.-based DuPont became separate companies on April 1 after a three-year merger between the two firms.

Dow — one of the world's largest suppliers of polyethylene and specialty plastics — posted a loss of almost $1.3 billion for the year after showing a profit of almost $4.8 billion in 2018. Sales for 2019 were down 13.5 percent to just under $43 billion.

For Dow, 2019 sales in its Packaging and Specialty Plastics unit — including PE — were down 16.5 percent to $20.2 billion. Pro forma pretax profit for that business was down almost 13 percent to $4.3 billion.

Sales at DuPont were down almost 5 percent to $21.5 billion for full-year 2019. The firm's 2019 profit of $600 million was down 85 percent from 2018. DuPont's Transportation and Industrial unit — including nylon and other engineering resins — saw 2019 sales fall almost 9 percent to $4.95 billion, with pretax profit down 13.5 percent to $1.3 billion.

LBI — based in Houston and London — saw 2019 sales drop 11 percent to $34.7 billion as annual profit slid almost 28 percent to just under $3.4 billion. The firm is one of the world's largest makers of PE and PP resins and ranks as North America's largest plastics compounder.

Sales for 2019 in LBI's Olefins and Polyolefins-Americas unit, which includes PE and PP resins, fell 10 percent to $8.4 billion as that unit's operating profit tumbled 21 percent to just under $1.8 billion.

In feedstocks used to make commodity plastics, West Texas Intermediate crude oil prices began January at just over $61 per barrel but tumbled almost 16 percent to $51.55 by the end of the month. Regional prices for natural gas also slumped 16 percent in the same comparison from $2.19 per million British thermal units (Btus) to $1.84.