Three prices down, two flat for commodity resins in August

Three North American commodity resins ended summer with price drops, while two others remained flat.

The price declines were seen by polyethylene, PVC and PET bottle resin. And although regional prices for polypropylene and polystyrene were flat, the days of early-year price runups, flat summer pricing and late-year price drops appear to be over.

North American PE resin prices ended a confusing summer in August. Pricing for that materials had been the cause of much debate for the three-month period. Some PE buyers saw a 3-cent price drop in June. That 3-cent drop later spread through the rest of the market, reaching most buyers by the end of July.

Even as some buyers were assessing the 3-cent June/July drop, another 3-cent drop hit the market. This second drop — and a full 6-cent drop for the summer — was in place to most buyers by late August.

Sources said that momentum for the price declines may have come from less-than-robust domestic demand. Esteban Sagel, principal of Chemical & Polymer Market Consultants in Houston, said in an email to Plastics News that there are "plenty of reasons" for the downward PE pricing trend.

"Some drivers that come to mind include global economic jitters related to the U.S.-China trade war and Brexit, as well as an excess surplus of material due to the completion of the first wave of projects in North America," he said.

Another market watcher told Plastics News that he thinks the PE resin market "is struggling to absorb all the new capacity, so it's become a buyer's market."

ExxonMobil and Sasol have started up world-scale LLDPE units this summer, he added, so those firms are working to gain share.

"This is creating competitive situations for other suppliers," he said. "Also, I think many domestic processors saw downstream orders slow down around midyear."

Recent PE price increase announcements also might have a hard time becoming reality. A PE resin buyer with a major processor in the Midwest U.S. told Plastics News that "with about 3 billion more pounds [of PE capacity] coming onstream in a few months from Sasol and Formosa, it will be very difficult to get an increase through."

"Export volumes are very high and prices are low, so there's not a lot of ammunition to push an increase through," he added.

In North American PVC, prices ticked down by a penny per pound in August after being flat in July. Prices for the material had made a surprising 2-cent increase in June. 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. One PVC market watcher told Plastics News that U.S. PVC exports "are weakening, and the domestic market isn't much ahead of last year when we look at housing and other indicators."

North American PET bottle resin prices slid down 2 cents in August, erasing a 1-cent gain from July. Both moves were tied into changes in feedstock prices. The July increase had reversed a surprising trend that had seen PET prices fall by 2 cents in June and by a total of 6 cents in the April-June period, when demand for bottled water and carbonated soft drinks typically is high.

The domestic PET market remains oversupplied, with bottled water usage attempting to make up for ongoing declines in carbonated soft drink demand.

Regional PP prices were flat in August after moving up 1 cent in July. That increase was caused by upward movement in price for polymer-grade propylene monomer. Prices for PP had been down 4 cents in June, canceling out a 4-cent price hike from May. Prior to those moves, a series of declines from November through March had sent PP prices tumbling 24.5 cents.

A July 31 explosion and fire at a major propylene site operated by ExxonMobil Chemical Co. in Baytown, Texas, has had minimal impact on PP pricing in the region so far. Forty-one people were injured in that accident, but none seriously. ExxonMobil's Baytown site also has PP resin production, which was not affected by the incident.

North American solid PS prices also were flat in August after moving up by an average of 2 cents per pound in July. Flat pricing for the material was somewhat surprising, since August prices for benzene feedstock, used to make styrene monomer, were down about 5 percent to $2.54 per gallon.

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

In PS production, Total Petrochemicals is preparing to close an older production line in Carville, La. But the company has said that the output of that line will be replaced by newer lines at the site. If that transition occurs, there should be little or no impact on North American PS supplies.

In feedstocks used to make commodity plastics, West Texas Intermediate crude oil prices began August at $58.60 per barrel but had declined to less than $55.20 by the end of the month for a drop of 6 percent. Regional prices for natural gas increased slightly from $2.23 per million British thermal units to $2.28 in the same comparison for an increase of 2 percent.