Despite global oversupply, polyethylene prices rise in March

Three commodity resins saw higher prices in North America in March, in spite of mixed signals from the region's economy.

Prices for all grades of high, low and linear low density PE were up 3 cents for the month, according to buyers and market watchers contacted by Plastics News.

The global PE market could be oversupplied by more than 50 billion pounds this year, according to a recent research note from John Richardson at the ICIS consulting firm. That's more than double the level of PE oversupply seen in recent years.

Higher container freight rates that had given other regions an advantage over China in the PE market now are going down as well, he said. These factors could lead to lower global PE prices.

"It was only ever a question of time — the time it took for freight rates to come down — before markets in China began to depress the rest of the world," Richardson said.

Claims of a booming Chinese economy in 2023 as it emerged from zero-COVID "failed to consider China's demographic, debt and real estate challenges — along with the record-high levels of global PE oversupply, much of which was due to events in China."

In March, some PE makers were trying to hold out for a 5-cent increase, but a major PE buyer in the Midwest U.S. told PN that wasn't likely to happen.

Market analyst Mike Burns said the increase was the result of "good demand and exports."

"The question is what's driving demand: restocking or consumer demand?" he added. "I think it's more likely that it's processor restocking."

PE supplies in the region are being affected by Nova Chemicals' declaration of force majeure on PE resins made at its plants in Sarnia, Ontario. In a March 21 letter to customers, officials with Nova in Calgary, Alberta, said the firm experienced "an unplanned outage" at its Corunna, Ontario, ethylene cracker. Officials said the estimated duration of the force majeure is unknown.

North American PE prices had been flat in February after a surprising upward swing in January moved prices up 3 cents. That hike came after prices had been flat for three consecutive months.

North American PP prices for March saw an 8-cent jump, matching a price increase seen for polymer-grade propylene (PGP) feedstock. Prices for the material also had been up 8 cents in March, with PP makers adding 1 cent in margin to a 7-cent increase seen in PGP.

PP prices had jumped up 11 cents in January, matching a similar move in PGP. The 27 cents in hikes seen in the first three months of 2023 comes after PP prices were down a net of 42 cents for full-year 2022.

But the PP price hikes of early 2023 could be short-lived, officials with New York-based PP supplier Blue Clover LLC said in a market update. They said prices for both prime PP and PGP could be down more than 10 cents in April.

Prices for both solid and expanded polystyrene were up 2 cents in March, following a 3-cent hike in February. The March price hike was linked to price fluctuations for benzene feedstock, which is used to make styrene monomer.

Market prices for benzene were up 19 cents in February to $3.77 per gallon, an increase of more than 5 percent. North American benzene prices now are up a total of 70 cents so far in 2023, a surge of almost 23 percent.

Regional PVC prices were flat in March after moving up 1 cent in both January and February. Availability of PVC improved somewhat in March, even with construction industry buyers making purchases ahead of spring construction.

The January hike ended a streak of six consecutive monthly price drops for PVC, including a 6-cent decline in December.

Market sources said short-term PVC availability could be impacted by a maintenance turnaround at Formosa Plastics Corp.'s PVC operations in Point Comfort, Texas. That work began in the first week of April and is expected to end in the first week of May. Formosa operates about 1.8 billion pounds of annual PVC capacity in Point Comfort.

PET bottle resin prices were flat for the second consecutive month after climbing 2 cents in January, as demand improved slightly. PET prices had been down a total of 6 cents in November and December.

PET supplies will be affected by Alpek SAB de CV's recent decision to close its PET resin plant in Charleston, S.C. The site, known as Cooper River, was built in the early 1970s and has annual production capacity of about 375 million pounds.

Alpek will transfer Cooper River's PET resin production to its other sites, enabling annual cost reductions of around $20 million and improvements in capacity utilization. Alpek is a partner in Corpus Christi Polymers LLC, a joint venture that's building a major PET resin and feedstocks plant in Corpus Christi, Texas. After a lengthy hiatus, work on that site resumed in August 2022.

Production is set to begin in 2025 at the plant, which will have annual production capacity of 2.4 billion pounds of PET and 2.9 billion pounds of purified terephthalic acid (PTA) feedstock.

In engineering resins markets, prices for nylon, polycarbonate and ABS resins all declined in the first quarter of 2023. Larger-than-normal inventories at the processor level and sluggish demand were cited as reasons for the declines.

Prices for nylon 6 and 6/6 resins in the first quarter were down 6-9 cents per pound, on average, with PC prices down 4-5 cents and ABS down 5 cents, sources said. Additional price decreases of 2-6 cents per pound for these materials could be seen in the second quarter, sources said.

In feedstocks, West Texas Intermediate oil prices opened March at $77.05 per barrel but by the end of the month were down almost 2 percent to $75.70. An unexpected production cut from OPEC sent prices up almost 10 percent from that point to $83.10 on April 13.

Markets for natural gas, used as a feedstock to make PE and PVC, have been lower than expected because of warmer winter weather, and they fell again in March. Prices for the material started the month at $2.75 per million British thermal units but had dropped more than 19 percent to $2.22 by the end of the month. They have continued to decline from that point, sliding almost 6 percent to close at $2.09 on April 13.