Markets for commodity resins polyethylene, polypropylene and PET continue to face challenges in the middle of 2021.
Analysts with research firm ICIS of Houston took a look at factors impacting PE, PP and PET during a recent online webinar.
Markets for all three materials still are recovering from supply and demand issues related to the COVID-19 pandemic, two hurricanes in 2020 and an unprecedented ice storm that hit Texas in February.
"I've seen a lot of things in 35 years in this industry, but the last 18 to 20 months are crazier than anything I've ever seen," said Brian Pruett, senior vice president with the Chemical Data Inc. unit of ICIS.
"Demand has picked up, but there's been wave after wave of supply destruction," said ICIS Global Editor Joseph Chang. North America market development head Jeremy Pafford added that supply chains have been challenged on many levels. "It will work out eventually, but it's been more difficult to move and obtain goods," he said.
In the PE market, North American demand has stayed steady during the pandemic, according to Americas Deputy Managing Editor Zachary Moore. Supplies of natural gas-based ethane feedstock give the region a cost advantage, he added, with crude oil prices above $60 per barrel.
PE capacity increases since 2016 — fueled by natural gas — have increased the region's production base by more than 35 percent, Pruett said. More capacity is on the way next year from Shell Polymers and Nova Chemicals, although the pace of these expansions has slowed a bit.
Much of this new capacity has been aimed at the export market, which now accounts for 40 percent of all North American PE sales.
"It's been an exceptional run for producers," Pruett said.
PE and PP both have seen major price increases since early 2020 as a result of strong demand and supply constraints. Pruett said the PE market might see one or two additional increases this year before the market potentially enters into a price correction.
Regional PP supplies also have been tight, due in part to limited supplies of polymer grade propylene (PGP) feedstock.
"Prices to date haven't been a major factor on polypropylene," Pruett said. "We haven't seen demand destruction. People are dying to get pounds."
Regional PP prices could be up again in June, Pruett said, since PGP prices aren't expected to decline. Moore added that lack of shipping container space, as well as higher shipping costs and longer lead times, have made it difficult for foreign PP to enter the domestic market and compete with higher-priced domestic resin.
In the PET market, prices and production have been affected by limited supplies of purified terephthalic acid (PTA) and monoethylene glycol (MEG) feedstocks, according to Vice President Antulio Borneo.
"The COVID economy brought a lot of demand for packaged goods," he said. "PET is still expected to be sold out."
Looking ahead, Chang said that resin markets could be tight through the fourth quarter and that end markets could be affected by an increase in decarbonization, with many companies trying to reach net zero by 2050.
"We really need the marketplace to have a dull summer with no production glitches so these logistics issues can work out," Pafford said. "We also need to return to some sort of normalcy from a consumer standpoint."