Price hikes bring unpleasant surprise to resin markets in December

A surprising series of price hikes hit North American commodity resin prices in December.

Regional prices for polypropylene resin were hit the hardest, soaring an average of 14 cents per pound in December as the result of strong demand, tight supplies of propylene feedstock and unplanned outages at some U.S. PP resin units.

North American prices for polyethylene resins also jumped 5 cents per pound in December, with solid polystyrene prices up 6 cents and PET bottle resin prices ticking up 1 cent.

A North American PP market that already has been impacted by tight supplies could be hammered by outages caused by a Dec. 15 fire at a plant operated by Total Petrochemicals in La Porte, Texas, combined with the unexpected shutdown of a PP line operated by Formosa Plastics Corp. USA in Point Comfort, Texas, according to market watchers contacted by Plastics News. No one was injured in the Total fire, but the unit hasn't been restarted.

"The [PP] market is struggling," Scott Newell of Resin Technology Inc. said in an email. "This feels worse than any hurricane we've ever had." He added that supplies of both propylene monomer and PP resin are "extremely tight."

"Feedstock pricing is going up and margins are expanding," Newell said. "We're expecting to see demand destruction and other market-correcting forces, but in the meantime, we're seeing PP converters actually contemplating the potential of shutting lines down and having to miss orders."

The North American PP market "is in desperate need" of impact copolymer PP, according to Gerard Selvaggio, a partner at New York City-area PP distributor Blue Clover LLC Polymer Solutions.

"Buyers still need product at this stage," he said in an email. "As of now, it remains an issue that buyers don't have enough resin to fill orders."

Selvaggio added that producers of reprocessed PP are selling large volumes because of that material's price advantage vs. virgin PP. Many reprocessed PP suppliers are sold out of that material for the next couple of months, he said.

Regional PP prices now are up 33.5 cents per pound since May. Sources said another double-digit price hike could take place in January. The Plastics News resin pricing chart was updated Jan. 7.

The 5-cent PE hike was the result of "general snugness" in resin supplies and by producers' ability to export material, according to a market source in the southeastern U.S. The source added that production constraints at some resin plants on the region also helped the increase take hold.

The recent shutdown of Braskem Idesa's PE production in Mexico also played a major role in the December move.

"The Braskem Idesa woes in Mexico are one of the key factors pushing prices higher," said Esteban Sagel, president of Chemical & Polymer Market Consultants in Houston.

"When that plant shut down on Dec. 1, suddenly, the North American region lost approximately 1.5 billion pounds of HDPE and 600 million pounds of LDPE supplies," he said. "This supply shock will take some time to be sorted out by the market.

"In the meantime, prices are going to be affected by this sudden increase in export demand. 2021 is certainly not providing an auspicious beginning to processors in the region," he said.

North American PE prices were up a net of 20 cents per pound in 2020. That increase is the largest seen for PE resin in the region since 2009, according to RTI.

The 6-cent PS hike followed a 2-cent increase in November and again was tied to higher prices for benzene feedstock, which is used to make styrene monomer. Benzene prices rocketed up 49 cents to $2.04 per gallon for December, an increase of almost 32 percent vs. the prior month.

PS prices for full-year 2020 were up a net of 12 cents. Markets for the material were affected in the second half of 2020 by the shutdown of almost 600 million pounds of styrene capacity operated by Westlake Chemicals Corp. in Lake Charles, La. A Westlake styrene unit was closed for several weeks after Hurricane Laura moved through the region.

The 1-cent PET bottle resin uptick in December came after prices were flat in November. It came as a bit of a surprise, since beverage-heavy PET sales decline in colder months. Regional PET prices showed a net decline of 1.5 cents per pound for full-year 2020.

Bottled water has been the largest beverage market in the U.S. since 2016, when it surpassed carbonated soft drinks, according to the Beverage Marketing Corp. Total bottled water volume grew almost 4 percent in 2019 and has shown volume growth every year since 1977, according to BMC, with the exceptions of 2009-09.

By comparison, per capita carbonated soft drink consumption in the U.S. has fallen from more than 50 gallons in the early 2000s to less than 37 gallons in 2019 — a drop of at least 26 percent, according to BMC.

PVC was the only commodity resin to see flat pricing in North America in December, although market watchers said price increases are possible in January and February, as processors that sell products into the building and construction markets look to build inventories.

Even with a flat December, North American PVC prices were up a net of 14.5 cents per pound for full-year 2020. The U.S. housing market was strong, as new homes were built and existing homeowners spent big on home improvement projects, due in large part to more people working from home during the pandemic.

Construction-related uses — including plastic pipe — account for around 60 percent of annual PVC sales in the U.S. and Canada. U.S. housing starts through October were on pace to reach almost 1.4 million for the year. That rate would be up about 0.5 percent vs. 2019 and up almost 5 percent vs. 2018.

In feedstocks, prices for West Texas Intermediate oil began December at $45.30 per barrel but had surged up to $48.50 by the end of the month for a jump of 7 percent. Prices had surged further to $50.60 in early trading Jan. 7.

Prices for natural gas — used as a feedstock in North American PE and PVC — began December at $2.88 per million British thermal units but had slumped to $2.54 by the end of the month for a slide of almost 12 percent.