The North American polypropylene resin market continued its unpredictable ways in June, with prices increasing an average of 12 cents per pound.
That surge followed a 13-cent hike that hit the market in May. Prior to that, regional PP prices had dropped 19.5 cents total in March-April. Factoring in previous increases, regional PP prices are up a net of 66.5 cents since December.
The June hike consisted of matching 4 cents of increases in price for polymer-grade propylene (PGP) feedstock and 8 cents of profit margin improvement that was successfully implemented by PP makers.
Heading into the last week of June, the PGP hike was expected to be higher and there was doubt if PP makers would see all of the 8 in margin improvement they were seeking. They hadn't been successful in getting any of the 5 cents in margin they tried to pass in May.
The ultimate makeup of June's 12-cent hike came as a surprise to some market watchers, including Scott Newell, a market analyst with Resin Technology Inc. in Fort Worth, Texas.
"It was a weird, nontraditional settlement for PGP," he said. "If you look at all the normal benchmarks for PGP, none of them held for June. I thought it could have been the opposite, with PGP getting the margin number."
Newell said that North American PP demand is strong across many markets, even though industry data shows a decline from last year. "The data shows sales, which are down because processors can't get material," Newell said. "Demand is still there, and as long as demand holds up, we can see higher prices."
He added that for PP processors, the availability of labor "is becoming the biggest challenge."
"Labor has become the new bottleneck," Newell said. "Before, it was supply. Now processors can't staff all shifts."
Many PP makers in the region remain on force majeure sales allocations, as the supply chain continues to recover from the ice storm that hit Texas in February. At one point shortly after the storm, almost 90 percent of North American PP capacity was offline.
Some producers now are seeking PP price hikes of 3 or 5 cents effective July 1 or 5 cents effective Aug. 1. Producers are not aligned on these moves, which would be in addition to any price changes from PGP. PP makers have gained more than 30 cents in margin improvement in the last year.
Newell said that regional PGP prices could be up 5-10 cents in July, but officials with Blue Clover LLC Polymer Solutions, a New York-area PP distributor, said in a note to customers that they "expect PGP pricing to trend lower over the next month as the supply situation improves."
Blue Clover officials added that shipping challenges are preventing lower-priced foreign PP from entering the U.S. market, as has happened in previous high-priced markets.
"The continued issues facing the global container market make it extremely difficult to customers to import any resin cheaply and quickly, which should keep prices elevated longer here in North America," they said.
Suppliers of PP and other resins are facing other logistics challenges as well, according to officials with M. Holland Co., a resin distributor based in Northbrook, Ill. "Bulk trucking firms are often declining to book long-haul, out of network loads due to extreme capacity constraints," they said in an email to customers.
"Logistics conditions remain strained, with trucking demand exceeding availability and continued congestion at ports primarily due to increased volume of ships and containers," M. Holland officials added. They advised customers to provide expanded lead times on orders to help ensure delivery dates.