Polyethylene and polypropylene resins posted surprising price reductions in October after seeing major price hikes since early 2020.
North American prices for all grades of high, low and linear low density PE dropped an average of 5 cents per pound in October. Prices for those materials had been flat in August and September — ending a streak of eight consecutive monthly increases — as PE makers were unsuccessful with a 5-cent hike attempt.
Market sources said the October price drop was the result of demand stabilizing as production recovers and producers bring on new capacity. During the recent Global Plastics Summit, IHS Markit PE analyst Nick Vafiadis said that COVID-19 and "epic weather events" had constrained production of PE resin and delayed new capacity from coming on.
Those conditions led to higher prices since early 2020, but the market "now appears poised for a correction," he added. "There are record amounts of new capacity coming on around the world, and destocking is happening as demand softens."
The pandemic has been a PE demand driver, and supplies were impacted by two hurricanes in the second half of 2020 and a winter storm that impacted the Gulf Coast in February 2021. A record run of price increases then created record margins for PE makers in North America and other parts of the world.
The October PE price drop is the first seen in North America since April 2020, according to the Plastics News resin pricing chart, when demand initially dropped as markets began to assess the impact of the pandemic. Most regional PE prices are up a net of 38 cents so far in 2021 and 58 cents since January 2020.
IHS projects annual global PE demand growth of 3.1 percent from 2021-25, with growth in China higher at 4.1 percent. Since the pandemic, PE demand has been strong in food packaging, hygiene and medical and online shopping.
In North America, about 9 billion pounds in PE capacity expansions are expected. Most recently, Gulf Coast Capital Ventures — a joint venture between ExxonMobil and Sabic — added almost 3 billion pounds of capacity in Corpus Christi, Texas. Shell Polymers plans to open a major PE unit near Pittsburgh during 2022. That location will have annual production capacity of more than 3 billion pounds.
The net result of these moves is expected to be lower PE resin prices.
"Prices have peaked and are ready to decline because of new capacity and the resolution of storm outages," Vafiadis said.
PP prices tumbled an average of 9 cents per pound in October after sliding 3 cents in September. Both of those moves matched drops seen in prices for polymer-grade propylene monomer. Prior to that, prices had increased 11 cents in August, again keeping pace with PGP.
Market sources said that although North American PP demand remains solid, it's leveled off a bit in recent months. Production of the material also has improved.
Even with the September and October declines, PP prices are up a net of 67.5 cents since December. During the GPS event, IHS Markit PP analyst Joel Morales said that the North American PP resin market is moving from being tight to well-supplied. "Demand has been stellar, but it's slowing," he added.
PP resin prices "are expected to decline with improving supplies," Morales said. "But the long term favors sellers, because of strong demand and because shipping costs insulate Western markets."
Global PP demand growth is projected at 4.7 percent from 2021-25, matching its growth rate of the previous five-year period. Recent PP demand drivers include medical applications, packaging and caps and closures, including living-hinge uses.
In North America, 5 billion pounds of new capacity through debottleneckings or expansions have been announced. Most recently, Braskem Americas added 1 billion pounds of new capacity in La Porte, Texas.