Tight supplies challenge PE, PP resin markets in 2020

The combination of COVID-19 and production outages have tightened supplies of polyethylene and polypropylene resins in 2020.

Market analysts Mike Burns and Scott Newell of Resin Technology Inc. explored markets for those materials as parts of Plastics News' Caps & Closures Conference.

"Plastics hit all points in the grocery chain," said Burns, who covers PE for Fort Worth, Texas-based RTI. "During COVID-19, polyethylene makers have replenished supplies as fast as they could.

"At first, there was strong essential demand, then nonessential demand for items like home improvement got stronger," he added.

Burns also said that strong export markets have led to lower PE inventory in North America. For 2020, 40 percent of PE made in North America is set to be exported, with robust sales to China.

Steady operating rates and some production outages also have allowed PE makers to raise prices by 14 cents per pound between June and August. Burns said the amount of that increase was "historic" for the summer months.

Although manufacturing restarts have been "stronger than expected" in 2020, Burns said domestic sales are up only 1 percent so far, while export sales have surged 20 percent.

Hurricane Laura has caused only "limited disruptions" to Gulf Coast PE production, Burns added, but the region still has some rail and logistics issues, and some PE makers have put force majeure sales limits in place.

Newell, a PP market analyst, said the North American PP market was well-supplied in early 2020 until some production outages for propylene monomer affected PP resin production. At one point, 15 percent of the region's propylene supply was out of production.

Propylene production "avoided widespread damage" from Hurricane Laura, Newell added, but some PP production has been affected.

North American PP supplies have been improved by the addition of 1.5 billion pounds via debottlenecking since 2015 and by Braskem's recent launch of a 1 billion-pounds-per-year line in Texas. Another 1.8 billion pounds of capacity will be added to the market in 2022, Newell said.

Among end markets, North American sales of PP into caps and closures are up 8 percent in 2020, with sales into cups and containers up almost 13 percent. Sales of the material into transportation uses are down because of what Newell described as "a lot of uncertainty" in the automotive market after early-year shutdowns.