PP, PET bottle resin prices down before full impact of COVID-19

Polypropylene and PET bottle resin were the only North American commodities to see price changes in March, but market watchers are saying that lower prices for most materials could be on the way as a result of the COVID-19 breakout.

PP and PET prices in the region each fell by an average of 4 cents per pound in March, with declines for both materials tied to lower feedstock costs, according to market sources. PP prices in the region now have declined for four consecutive months. Those four decreases have lowered prices by a total of 8.5 cents.

The COVID-19 outbreak could lead to higher PP demand for medical uses as more cases are treated. PP fibers are a key component in N95 face masks, which are needed to protect health care providers. Production of N95 masks is rapidly increasing worldwide to address shortages.

PP sales into food applications also could increase in both takeout orders from restaurants and from store items, as consumers load up on more groceries to avoid frequent trips that could place them at risk. The automotive, construction and appliance markets, however, are on track to use less PP, as economic uncertainty prompts consumers to delay major purchases.

The 4-cent March PET price drop came after prices ticked down one cent in February. Regional PET prices now have fallen in four of the last five months, bringing prices down a total of 7 cents. Although PET demand increases in warmer months with higher beverage consumption, the domestic PET market remains oversupplied.

PET demand in one way could benefit from the outbreak, as consumers load up on bottled water, a major PET application. But if lockdowns last into warmer months and stop crowds from gathering, PET sales into carbonated soft drinks and bottled water could be negatively affected. In the medical market, glycol-modified PET has seen demand rise from increased use in medical face shields that are needed by health care workers dealing with COVID-19.

North American polyethylene resin prices were flat for March, although PE makers tried to push a 4-cent hike through. Changing market conditions related to COVID-19 eventually led them to suspend that attempt.

In a letter to customers, officials with ExxonMobil Chemical of Houston said that they were suspending their 4-cent increase attempt "despite the significant increase in demand for products that society needs." Other PE makers have taken similar steps, market sources said. Demand for PE in food and medical applications have increased in reaction to the outbreak.

"It would have been hard for [PE makers] to raise prices during a national medical crisis," a major resin buyer told Plastics News. Regional PE prices also had been flat in February after seeing a surprising 4-cent increase in January.

In the polystyrene market, prices also were flat in March, but PS maker Americas Styrenics already has made the rare move of announcing a price decrease. Company officials said on March 26 that prices for all its PS grades would see a 7-cent per-pound decrease on April 1.

March was the fifth consecutive month the regional PS prices were flat, but spot prices for benzene feedstock, used to make styrene monomer, saw some major declines late in the month. Benzene prices had closed at $2.64 per gallon in February, but spot prices briefly fell under $1 in late March, as global demand dried up in the wake of COVID-19.

North American PVC prices were flat in March after moving up a total of 5 cents in the first two months of the year. Market sources said those early-year price hikes were the result of tighter supplies and of processors building inventories in advance of spring construction.

U.S. construction activity was stronger than expected in late 2019. Rigid pipe and other construction applications account for more than half of PVC consumption in the U.S. and Canada.

On March 25, consulting and data firm ICIS of Houston hosted a webinar that covered the resin and packaging markets. Americas Deputy Manager Zachary Moore said during the webinar that "there's a lot of downward pressure" on prime grades of PE and polypropylene because of lower oil prices and possible lower demand.

The coronavirus "has had mixed effects" on resin and packaging markets, North America Market Development Head Jeremy Pafford said. "If you're making personal hygiene products, you've been very busy, but if you make discretionary consumer products, it's been nerve-wracking."

North American resin buyers also need to keep market factors in perspective, Consulting Vice President James Ray said. "You don't want to build excess [resin] inventory at a low price then get overextended on cash flow," he added.

Ray added that food packaging demand isn't usually as affected by GDP declines as some other markets. "People are still going to eat," he said. "They might be eating chicken instead of steak, but there's still going to be plastic wrap around it," Ray said.

Liquid food applications — including milk — account for almost 9 percent of annual high density PE consumption in the U.S. and Canada. Other food-related markets account for another 2.5 percent.

Food packaging film accounts for almost 18 percent of U.S. and Canadian low density PE consumption and almost 17 percent of the region's linear low density PE use.

In PP, food-related applications account for almost 11 percent of the North American market.

In feedstocks used to make commodity plastics, West Texas Intermediate crude oil prices began March at $44.80 per barrel but had plummeted 54 percent to $20.50 by the end of the month. Global suppliers Saudi Arabia and Russia flooded the market with oil in a pricing war. Prices had recovered to $26.50 in late trading April 9, but that level was still almost 57 percent less than its Jan. 1 price.

Regional prices for natural gas were down only 2 percent during March to $1.68 per million British thermal units. Prices for that material were back up to $1.77 in late trading April 9, down 19 percent to date in 2020.