A quiet October for commodity resin prices

October was quiet month on the North American commodity resin pricing front, with only polypropylene registering any movement.

North American prices for PP fell an average of 2 cents per pound in October, amid lower feedstock costs and lackluster demand. That drop negated 1-cent hikes from July and September. Regional PP prices were flat in August.

Market watchers told Plastics News that North American PP sales are up less than 2 percent so far in 2019. Factoring out export sales leaves domestic demand slightly negative for the year.

Export sales have more than doubled, but from a small base, adding only 25 million pounds per month to a market that is measured in billions. Demand from domestic markets — with the exception of sheet — has been down because of an overall soft U.S. economy. U.S. GDP growth for the third quarter checked in at 1.9 percent.

Earlier this year, a 4-cent PP price drop in June canceled out an increase of the same amount from May. The last major price move for the material came between November 2018 and March 2019, when PP prices tumbled 24.5 cents.

Reduced PP price volatility in recent months is the result of improved supplies of monomer for the region, sources said. The North American PP market "is in transition right now," according to Scott Newell, a market analyst with Resin Technology Inc. in Fort Worth, Texas.

"Operating rates are high, but demand isn't good at all," Newell said. "The whole industry is full of inventory, from monomer to resin to the converter level."

At the recent K 2019 trade show in Düsseldorf, Germany, Plastics News spoke with executives from PP makers LyondellBasell Industries and Braskem. Ken Lane of LyondellBasell said that global PP growth is expected to continue at a 4 percent annual rate, with North American growth at 2-3 percent, even though North America is off that pace this year.

Braskem is adding a little more than 1 billion pounds of annual PP production in La Porte, Texas, in the second quarter of 2020. North America Executive Vice President Mark Nikolich said the primary target of PP made by the new line is the U.S. market, although he said it will also support the firm's efforts in Brazil and Europe.

Nikolich added that he's unconcerned by a slow 2019 growth year in North America, where sales have fallen short of the 2.5 percent average that the firm expects in the current market.

Regional prices for all grades of polyethylene, PVC, polystyrene and PET bottle resin all were flat in October. PE prices had been up an average of 3 cents per pound in September. Drone attacks on Saudi Arabian oil assets on Sept. 14 didn't have as much of an impact as expected, but heavy rains that hit the Houston area a few days later were enough to push the 3-cent hike through.

The September hike came after regional PE buyers weathered a confusing summer in which prices fell a total of six cents per pound between June and August. Reasons for the decline varied from buyer to buyer, but many said increased supplies of PE in recent years played a role.

PE makers had announced 8-cent increases for Oct. 1, but those moves were made when the impact of the Saudi attacks was expected to be much greater.

PVC prices were flat for the second consecutive month in October after ticking down a penny per pound in August. Prices also had been flat in July. Construction activity, which drives U.S. demand for the resin, hasn't been overly strong in 2019. Through June, U.S. housing starts were down more than 4 percent vs. the same period in 2018, according to the U.S. Census Bureau.

North American solid PS prices were flat for the third consecutive month in October after moving up by an average of 2 cents per pound in July. A minimal October price increase for benzene feedstock — used to make styrene monomer — wasn't enough to move PS prices for the month.

Domestic PS demand showed growth of around 1 percent in the first half of 2019, market watchers said, with gains in consumer products and electrical/electronic applications.

North American PET bottle resin prices were flat for the second straight month in October after sliding down 2 cents in August. That move was tied into changes in feedstock prices. The domestic PET market remains oversupplied, with bottled water usage attempting to make up for ongoing declines in carbonated soft drink demand.

Outside of commodities, Plastics News recently reported that abundant supplies of virgin resin have pushed down North American prices for recycled PET since early 2019. Even with the recent declines, recycled PET remains more expensive than virgin grades.

PN showed a decrease of 10 cents per pound for all grades of post-consumer PET. That includes both clear and green materials and both flake and pellets.

Recycled PET prices have been influenced by lower prices for virgin PET bottle resin. So far in 2019, virgin PET bottle resin prices are down a net of 6 cents per pound, according to the Plastics News resin pricing chart. Virgin PET supply continues to outpace demand in the region.

According to a Sept. 5 report from the PetroChem Wire news service, lower virgin PET prices have caused some end users to bypass their normal purchasing of recycled PET, which has driven down these prices. "The bloated PET market underscores the high cost of recycling the most common consumer plastic, relative to fresh PET pellet made from burning hydrocarbons," the report said.

In feedstocks used to make commodity plastics, West Texas Intermediate crude oil prices began October at $54.10 per barrel and were almost unchanged by the end of the month, advancing less than 1 percent to $54.20. Regional prices for natural gas increased almost 13 percent in the same comparison, from $2.33 per million British thermal units to $2.63.