North American polypropylene resin prices continued an unpredictable 2021 by falling an average of 12.5 cents per pound in March, but signs point to price hikes soon.
Demand for PP resin remained strong across many end markets in March. The price decline was the result of a demand drop for propylene monomer feedstock.
Propylene demand was down as many PP resin plants were struggling to come back from outages caused by Winter Storm Uri, which hit Texas in mid-February. Regional propylene monomer prices were down 18.5 cents per pound in March.
At its most extreme, North American PP plants were operating at only 12 percent of capacity. That number had improved to about 70 percent by the end of March, sources said, as plants came back online at reduced rates.
Regional PP prices had soared an incredible 61 cents per pound since December. That run included hikes of 14 cents in December, 13 cents in January and a shock-inducing 34 cents in February.
Resin supplies already had been tight after a pair of hurricanes hit the Gulf Coast in August and September. Propylene supplies have been constricted since early 2020, as lower U.S. gasoline consumption because of the COVID-19 pandemic has led to lower refinery operating rates. More than half of North American propylene is a by-product of gasoline production.
PP demand in many consumer and industrial good remains high. But the price drops of March may give way to increases in April, as suppliers are seeking hikes of 6 cents per pound on top of whatever changes hit propylene.
"Polypropylene demand is still high, even at these prices," said Scott Newell, a PP market analyst with Resin Technology Inc. in Fort Worth, Texas. "This isn't the response we'd normally see."
Newell added that some PP processors have had to cut back on their own production of finished products by 20-40 percent because of a lack of resin. Others have added a surcharge on PP products because of high resin prices.
"We could see some allocation [of resin] through April and May," he said. "It could take the majority of the year to get supply and demand back in balance."
Global supply chain problems — including the recent blockage of the Suez Canal — are preventing PP imports from reaching North America as they have in previous years, according to Phil Karig, managing director of Mathelin Bay Associates in St. Louis.
"In the past, foreign PP typically began flooding into the U.S. almost immediately when U.S. prices rose enough to allow foreign producers to profitably sell here after paying international freight and customs duties," he said in an email.
"In most cases PP imports helped bring U.S. prices down within three or four months. Right now, though, chaos in the international supply chain will keep prices for PP and some other resins higher than they would otherwise be for at least several more months."
Esteban Sagel, principal with Chemical & Polymer Market Consultants in Houston, said that regional PP supplies "remain tight, and [imports] are probably not going to be much help this time around."