North American PE, PP resin prices shift in September

Regional events and feedstocks have sent North American selling prices for polyethylene and polypropylene resins up since Sept. 1.

Prices for all grades of high, low and linear low density PE in the region are up an average of 3 cents per pound in that time frame, sources told Plastics News. Drone attacks on Saudi Arabian oil assets in the Middle East on Sept. 14 did not 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 added.

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

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 of its affected capacity back running by the end of the month. U.S.-based shale oil and gas also have 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.

He added that earlier in September, 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 pre-buying in August. Then, because of the Houston weather issues, prices went up for both domestic and export markets.

"Buyers always pick up a hurricane car [of resin] just in case, but that's not true demand," Burns said. He added that business volume for domestic PE processors "has been slow this summer, but better than last year."

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 — including more this summer from ExxonMobil and Sasol — 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 is not likely to go through at the full amount if it goes through at all, buyers said.

The North American PP market has seen prices bump up 1 cent per pound since Sept. 1, 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 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 are 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 — have 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.