Resin prices may be volatile in 2025

North American resin markets had some of their traditional ups and downs in 2024, but global political and economic factors could make prices volatile in 2025.

One major issue resin analysts see is the potential impact of 25 percent tariffs on all imports from Canada and Mexico and 10 percent tariffs on all imports from China, proposed by the incoming Donald Trump administration.

Market analyst Esteban Sagel, principal of Chemical & Polymer Market Consultants in Houston, said in a research note that these tariffs "could pose significant challenges" for the U.S. polymer industry. He noted that Canada, Mexico and China in 2023 accounted for 41 percent of U.S. polyethylene exports, 69 percent of polypropylene, 73 percent of polystyrene, 35 percent of PVC and 60 percent of PET.

"Any retaliatory actions targeting these materials could have a severe impact on U.S. polymer producers, potentially disrupting trade flows and market stability," Sagel said.

Market analyst John Richardson of ICIS in Houston pointed out that, since 2021, the U.S. has gained $2.2 billion in annual linear low density PE sales and almost $900 million in annual high density PE sales to China.

"This has occurred as Saudi Arabia, Iran and South Korea [and others] have lost a lot of ground," he said in a research note. "The U.S. gains are the result of a big drop in import tariffs in February 2020 … and the strong U.S. ethane-based cost position.

"But Donald Trump's election victory has pushed us into a world of uncertainty," Richardson added. "Almost anything might now happen." He added that if China responds to increased U.S. tariffs with increased tariffs on imports of U.S. PE, as it did in 2017, then the U.S. loss could be a gain for South Korea, Iran and other countries that export PE to China.

Richardson also pointed out that U.S. PE trade flows to other parts of the world — such as Southeast Asia, Europe and Latin America — could increase in 2025 as they did in 2017 as other countries fill the gap created by a loss of sales of PE to China.

"We are in a world of confusion … where anything might happen, from a full-blown global trade war to compromises, lots of deals and no major changes to global chemicals and other trade flows," he said. "I'm betting on somewhere in between these two extremes. I think we will end up with some changes in trade flows, but mainly just a reshuffling of the pack."

In explaining his outlook, Richardson said the U.S. "is dependent on low-cost imports, and the imports must come from somewhere, with the working class in the U.S. a key part of the president-elect's constituency."

"In practical terms … it's going to be hard and extremely risky to unwind the complex integration of supply chains," he added. "More reshoring to the U.S., the feasibility of which will vary manufacturing sector by manufacturing sector, seems likely to take a good while."

At consulting firm C-MACC in Houston, officials said the proposed tariffs on Mexico and Canada "surprised both countries, but maybe Canada the most, as it is unclear what the Trump Administration wants in a negotiation."

PE is a "significant export" from Canada to the U.S. as resin pellets and film, they added. Pellets can easily be rerouted or swapped, with Canada exporting elsewhere, while more U.S. PE stayed in the U.S. But retaliatory tariffs "would cause higher pricing in many regions [for] autos, fuels and polymers, but also food."

C-MACC officials further said that a tariff war "is just one factor that could upend global [PE] markets in 2025, with U.S. exports most at risk … adding to risks of changing production economics, economic growth and more China capacity."

"Local protectionism could see North America, the Middle East and China fight more for export share in 2025," they added. "While China is in a PE net deficit [trade] position, it's grade-specific, with surpluses of HDPE and LDPE emerging already.

"Understanding global pricing and trade arbitrages will become increasingly important for [PE] sellers or buyers in 2025."

Transforming the future

Several recent M&A deals and production decisions also will affect the direction of resin markets in 2025. Materials leaders LyondellBasell, for example, made a Middle Eastern investment in the second half of 2024. LYB and Dow Inc. also each made recycling-related acquisitions in that period.

LYB of Houston bought a 35 percent stake in Saudi Arabia-based National Petrochemical Industrial Co. (NATPET) from Alujain Corp. for $500 million. Officials said the deal positions LYB to grow and upgrade its core PP resin business through access to advantaged feedstocks, plus additional product marketing capacity in a strategic region.

NATPET operates almost 900 million pounds of annual PP production capacity in Yanbu, Saudi Arabia. Alujain is majority owner of NATPET and a longtime licensee of LYB's Spheripol-brand PP production technology, which it uses in Yanbu.

For LYB, a major global supplier of PE and PP resins, the investment in NATPET "reflects our strategy of growing and upgrading our core around assets and businesses with lasting advantages," CEO Peter Vanacker said.

Also in the first half of 2024, LYB acquired PreZero US Inc.'s recycling operations in California, a site with capacity of approximately 50 million pounds per year. LYB will lease the facility where the equipment is located in Jurupa Valley, Calif. The plant will process post-consumer resins that will be marketed under the CirculenRecover brand. Production is expected to begin through LYB in 2025.

Midland, Mich.-based Dow acquired private equity-backed film recycler Circulus Holdings PBLLC. Dow is trying to increase its use of recovered resin by the end of the decade. Circulus has facilities recycling LDPE in Ardmore, Okla., and Arab, Ala., with a total reprocessing capacity of 110 million pounds.

Ara Partners, a private equity firm focused on projects that decarbonize the economy, invested in Circulus in 2019. The acquisition "will allow Dow to combine our company's industry-leading materials science technology with Circulus' film recycling expertise to accelerate progress towards our 2030 Transform the Waste goal," Dow executive Karen Carter said.

In engineering materials, Abu Dhabi National Oil Co. (Adnoc) in October announced its acquisition of specialty materials giant Covestro AG in a deal valued at nearly $13 billion.

Rumors of the companies' acquisition talks surfaced in June 2023. "Concrete negotiations" were happening by June 2024, officials with Leverkusen, Germany-based Covestro said.

Covestro said in a statement that "there are no plans to sell, close or significantly reduce Covestro's business activities as part of the transaction." In the investment agreement, Adnoc says it will not initiate any of these activities.

"We are convinced that the agreement reached today with Adnoc International is in the best interest of Covestro, our employees, our shareholders and all other stakeholders," Covestro CEO Markus Steilemann said in a news release. "With Adnoc's support, we will have an even stronger foundation for sustainable growth in highly attractive sectors and can make an even greater contribution to the green transformation."

The parties' investment agreement also stipulates that Adnoc commit itself to fully supporting Covestro's "Sustainable Future" strategy. Covestro aims to achieve climate neutrality for its Scope 1 and Scope 2 emissions by 2035, and the group's Scope 3 emissions are also set to be climate neutral by 2050.

Covestro is a global supplier of polycarbonate resins and films, thermoplastic polyurethane, PU materials and foams, and other specialty chemicals and materials. Like with many other producers, its margins have been under pressure from a combination of weak demand and price pressure from low-cost imports.

At materials firm Celanese Corp. in Dallas, major drops in demand have led the firm to idle some of its production plants. Officials said Nov. 4 that Celanese is "reducing manufacturing costs through the end of 2024 by temporarily idling production facilities in every region and driving cash generation through an expected $200 million inventory release in the fourth quarter."

On an earnings call, officials said Celanese is idling production units making acetic acid, vinyl acetate monomer (VAM) and similar products in Singapore and a VAM plant in Frankfurt. Acetic acid is used to make acetal resins and also is a primary ingredient in vinegar production. VAM can be used to make polyvinyl acetate (PVA) and other specialty resins.

Details on other sites were not provided. Celanese also reported its third-quarter sales were down almost 3 percent to $2.65 billion vs. the year-ago period, as profit for the quarter plunged almost 88 percent to $116 million in the same comparison. Looking ahead, Celanese expects demand conditions to further decline in the fourth quarter as automotive and industrial segments react to recent dynamics by seasonally destocking at heavier than normal levels.

Celanese is the world's largest maker of acetal resins. The firm made a major move into engineering resins in late 2022 when it acquired most of DuPont's Mobility & Materials unit in an $11 billion all-cash deal. That deal included Zytel and Rynite nylon, Crastin polybutylene terephthalate, Vamac and Hytrel elastomers, as well as other materials. The transaction brought to Celanese 29 global manufacturing sites that employ around 5,000 in manufacturing, technical and commercial roles.

On the earnings call, stock analysts asked several questions about Celanese's Engineered Materials unit, which includes the businesses acquired from DuPont. "Our long-term expectation for this [EM] business is no different than it's been," CEO Lori Ryerkerk. "The challenge we've had is the current macroeconomic conditions and recent demand deterioration."

Celanese ended the year by announcing that Ryerkerk is on her way out after leading the company since 2019. Ryerkerk will be replaced by Scott Richardson, currently chief operating officer. Richardson is to begin that post Jan. 1.

During the conference call for the third quarter, Richardson had said Celanese plans to "supercharge the pipeline" on engineered materials. "While we have had some good metrics, it's not been enough to offset the downside we've seen from some of the demand challenges," he added. "We've got to continue to aggressively work with customers [and] continue to penetrate in non-automotive sectors."

In November, three major commodity resins saw lower prices, with two staying flat. Regional prices for PP, PVC and PET bottle resin were those seeing price drops.

North American PP resin prices fell an average of 3.5 cents per pound in November. That decline followed a similar move for polymer-grade propylene feedstock, according to sources contacted by Plastics News. Prices for the material had been down 6 cents in October and 4 cents in September after increasing by 2 cents in August.

Combined with previous increases and decreases, regional PP prices were down a net of 6.5 cents in the first 11 months of 2024. In a recent market report, PP supplier Blue Clover of New York said that the market "has seen a big pullback in PP operating rates the past couple of months."

"This lever was pulled to decrease the PP days of supply inventory number, which was too high," the report said. "Simultaneously, PP producers and distributors lowered pricing to sell excess inventories heading into the end of the year. These two measures are close to successfully rebalancing the PP excess supply."

The report also cited industry data showing that domestic PP demand was up 3 percent in October vs. September after dropping 12 percent from August to September. Blue Clover expects spot opportunities to buy PP at low prices through the end of the year, but the firm then expects PP supply "to be more snug when we start 2025 and for prices to rally."

Regional PVC prices declined an average of 1 cent per pound in November, marking the second consecutive monthly price drop for that material. Regional PVC prices also have dipped three times in the last four months. Prices were flat in September after being down 2 cents in August.

A drop in seasonal demand was cited as a reason for the November price drop, as construction activity across most of the U.S. slowed with the arrival of colder weather. U.S. housing starts declined slightly in October, coming in at an annual rate of just under 1.42 million, according to the U.S. Census Bureau. That number was down almost 1 percent vs. September, and down almost 8 percent vs. the same month in 2023.

Construction activity accounts for about 60 percent of North American PVC demand. Combined with previous increases and decreases, regional PVC prices were down a net of 4 cents in the first 11 months of 2024.

In the PET market, prices fell an average of 1 cent per pound in November, marking the fourth consecutive month with lower prices. Prices had dipped 4 cents in October. The total four-month price drop was 10 cents.

Prior to these declines, prices for the materials had been up 1 cent in both June and July. The November price drop followed lower prices for raw materials, including paraxylene and purified terephthalic acid.

Combined with previous increases and decreases, PET prices now are down a net of 9 cents so far in 2024. PET demand in North America has been in decline since August. Seasonal demand for bottled water and carbonated soft drinks often influence North American PET prices. Demand from those markets typically declines when weather cools in most of the region later in the year.

Regional prices for PE and polystyrene resins were unmoved in November. PE prices had declined an average of 3 cents in October, driven by sagging demand and rising inventory levels. Market sources said PE production was flat for October, even as inventories swelled by 235 million pounds. That brought the amount PE inventories have increased in the last three months to 750 million pounds.

Regional PE buyers had been looking for price drops starting in late summer, but resin makers were able to keep prices flat. Based on previous price moves, regional PE prices increased an average of 10 cents per pound in the first 11 months of 2024.

Exports of PE resin from the U.S. and Canada reached an all-time high of 44.7 percent of total production in 2023. The export rate was slightly higher at 45.4 percent in the first 10 months of 2024.

There's some concern among PE market watchers that tariffs on imports proposed by the incoming Trump administration could affect U.S. PE exports by leading other countries to place retaliatory tariffs on U.S. exports, including PE resin.

Looking to 2025, market analyst Mike Burns said North American PE resin production is expected to exceed regional demand by nearly 50 percent.

"Robust and constant exports will need to continue to maintain a [North American] supply and demand balance," he added in a recent report.

Key contributing PE market factors in 2025, according to Burns, will be the timing of China's additional 10 billion pounds of new production expected to come online as well as general economic conditions in that country. The 2025 PE market also will be affected by solid global demand and firm oil prices that will allow North American suppliers to continue to export.

An additional 5 billion pounds of PE production added in North America in 2023-24 will be readily available in 2025, Burns said. "Regional demand will not drive or sustain higher prices [and] exports will be essential to balance inventories and influence pricing," he added. "If exports are reduced, unlikely rigorous production cuts will be required to balance supply and demand."

Also in 2025, according to Burns, lower energy costs will put downward pressure on global prices and excessive global production is expected to price North American resin closer to the export price.

PS prices in the region were flat in November, even though prices for benzene, which is used to make styrene monomer, saw a slight decline. PS prices had been down an average of 3 cents in October — when benzene prices fell 13 percent — after being flat for the previous two months and five times in the last six months. The only month that saw price movement in that time period was July, when prices fell 1 cent.

Prices for benzene — a feedstock used to make styrene monomer — dropped 3 cents in October to $3.10 per gallon, but that 1 percent dip wasn't enough to move PS prices. Benzene prices had slumped a total of 38 cents from July to September, but PS makers were able to limit price drops for their material to 1 cent in that period.

Regional prices for engineering resins nylon, polycarbonate and ABS also experienced price drops in the second half of 2024. Nylon 6 and 6/6 prices fell an average of 15 cents in the second half of 2024 after producers were able to achieve gains averaging 18 cents in the first half. For PC and ABS, prices for each material dipped 5 cents in the second half after rising an average of 10 cents in the first half.

"It's been a challenge for all of these [engineering resin] materials in the second half," one buyer in the Midwest U.S. told PN. "Only a few markets like solar are up. Demand everywhere else is down, whether it's automotive or construction or electrical/electronic."

In feedstocks, regional prices for crude oil moved down slightly in November. West Texas Intermediate oil prices opened the month at $69.30 but slid almost 2 percent to $68 by the end of the month. They've edged up slightly from that point, up just over 1 percent to $68.80 in late trading Dec. 10.

Oil prices began 2024 at $71.65 per barrel and at their peak were up 21 percent to $87 in early April. From that point, prices bounced around but declined overall. The Dec. 10 price was down 4 percent vs. the Jan. 1 price.

Markets for natural gas, used as a feedstock to make PE and PVC, started November at $2.71 per million British thermal units, but surged 24 percent to $3.36 by the end of the month, mainly as a result of colder temperatures. From that point, prices have declined almost 6 percent to $3.17 in late trading Dec. 10. The Dec. 10 price is down just over 4 percent from the Jan. 1 price of $3.31.