Tightening supplies and solid demand have sent North American prices for polyethylene, suspension PVC and solid polystyrene resins higher since Aug. 1.
September could see prices climb even higher, as much of the resin production on the U.S. Gulf Coast has been closed in the wake of Hurricane Laura, which made landfall shortly after midnight Aug. 27, bringing destructive winds and heavy flooding.
Regional prices for all grades of PE increased 5 cents per pound in August, with PVC up 3 cents and PS up 2 cents. For PE, it's the third consecutive month that prices have climbed, following a 4-cent hike in June and a 5-cent move in July. Some PE end markets have seen growth as a result of the COVID-19 pandemic.
"We have to determine the effect of [Hurricane Laura], but overall polyethylene demand is still strong," PE market analyst Mike Burns said. "Grocery stores are still full."
"Some processors are seeing record years," added Burns, who is with Resin Technology Inc. in Fort Worth, Texas. "Products for outdoor leisure activities are flying off the shelf."
The back-to-back-to-back summer price increases are rare for the PE market, based on previous price activity. Burns said that hurricane-related shutdowns could allow a 5-cent increase for September to take hold, but he added that 2021 could see "a major correction" in PE demand if COVID-related sales trends fade.
The 3-cent PVC hike for August followed increases of 3 cents in June and 2 cents in July. Demand for the material has increased as construction markets have begun to recover from COVID-19. Construction-related uses account for around 60 percent of PVC consumption in the U.S. and Canada.
Export sales of PVC from North America also are strong and producer inventory levels remain around seven days, a relatively low level, according to a market source contacted by Plastics News.
"Inventory is the lowest it's been in a long time," the source said.
The source added that regional PVC supplies have been limited by force majeure sales limits put in place by Formosa Plastics Corp. USA because of operating challenges at that firm's complex in Point Comfort, Texas. Regional PVC makers now are seeking increases of 3 cents per pound for September.
The 2-cent jump in PS prices for August comes after prices moved up 3 cents in July and 2 cents in June. The August PS price hike followed an increase for benzene feedstock, which is used to make styrene monomer. Benzene prices moved up 15 cents to $1.53 per gallon during July, a jump of more than 10 percent.
Higher prices for PE, PVC, PS and other commodity resins could place pressure on North American processors, according to Phil Karig, managing director with Mathelin Bay Associates in St. Louis.
"In the wake of COVID-19, it's difficult to lump all plastics processors into one bucket when it comes to being able to absorb recent resin price increases," he said. "Some processors are experiencing good, and even outstanding, demand especially in markets serving consumers directly and producing disposables."
Karig added that products for new housing construction and home renovation "are also benefiting from the sudden shift to more working from home," but processors dependent on packaging for food distribution to schools and restaurants "are seeing less robust demand and are less able to absorb resin price hikes."
Market analyst Esteban Sagel said that he has been surprised by strong prices for North American commodity resins. He cited "the unprecedented and rapid escalation" of exports from North America to China as one reason for higher PE prices.
"The U.S. has clearly benefited from this trend, in spite of the commercial and trade war between the two countries," said Sagel, president of Chemical & Polymer Market Consultants in Houston. Domestic demand has been "somewhat strong," also lifting prices, he added.
The impact of Hurricane Laura could tighten supplies and lead to higher September prices, even if production capacity is undamaged and soon comes back online. About 75 percent of U.S. petrochemical production — including 63 percent of plastic resin production — is in the projected path of the storm in Texas and Louisiana, according to Paul Bjacek, chemicals research lead with consulting firm Accenture in Houston.