Market prices for PE did take a surprising upward swing in January, increasing an average of 3 cents per pound. That hike came after prices had been flat for three consecutive months. Although demand was down in the second half of 2022, PE makers were able to hold prices flat by reducing production and increasing the amount exported from North America. These moves were able to counteract drops in domestic demand caused by an economic slowdown. Prices for all grades of PE were down a net of 2 cents for full-year 2022.
PE demand also had been down because processors had built larger-than-normal inventories due to the pandemic, sources said. But typical supply-demand factors that lead to price movement weren't evident in January.
"Supply is meeting demand [for PE resin]," one market watcher told PN. "Inventories are low at the producer level because of record exports in December."
The source added that PE supplies in the region have been tightened somewhat, even if not to the level that normally would support a price increase. PE production operated in Texas by Chevron Phillips Chemical Co. was impacted by cold temperatures in late December, while PE production operated in that state by Ineos Olefins & Polyolefins experienced tornado damage in late January.
Increased exports have absorbed new North American PE capacity in recent years. From 2019-21, almost 40 percent of the region's overall PE production was sold into export markets, with that amount reaching a record 21.1 billion pounds in 2022. By comparison, the export market share of North American PE sales averaged only 24 percent from 2015-18.
Polypropylene resin prices in the region surged 11 cents per pound for January, matching an increase seen for polymer-grade propylene feedstock.
Supplies of PGP in the region were tightened by planned turnarounds at plants operated by Enterprise Products and Invista in Texas, as well as from reduced propylene output from oil refineries impacted by freezing weather that hit the Gulf Coast in late December.
"This [increase] was definitely supply-driven, although that's now expected to reduce somewhat," said David Barry, a market analyst with PetroChem Wire in Houston. He said the Enterprise and Invista turnarounds are expected to be completed by the end of February.
The PP price hike is the first seen for the material after seven consecutive monthly price drops. Regional PP prices were down 4 cents in December and down a net of 42 cents for full-year 2022.
Although PP demand isn't strong at present, brief shutdowns experienced by Ineos Olefins & Polymers and Braskem America in late January could have an impact on supplies. Production at Pinnacle Polymers' PP site in Garyville, La., also was affected by the late December freeze.
"PP supply remains tight as we head into February," officials with New York-based supplier Blue Clover LLC said in a market update. "Polypropylene producers were cutting inventory rates for several months, and that was before the January price rally in PGP. There's simply not a lot of excess PP material out in the market at this moment."
Even if PP demand is better than expected at present, it's "still not great," according to Barry. "A lot of polypropylene goes into manufacturing of durable goods, and the manufacturing economy seems to be in a recession," he added.
PET bottle resin prices also were up 2 cents in January, as demand improved slightly. Prices were impacted by markets for paraxylene and purified terephthalic acid (PTA) feedstocks.
PET bottle resin prices had been down a total of 6 cents in November and December. Even with those declines, North American PET prices finished 2022 showing a net increase of 16 cents. Strong seasonal demand for bottled water and other beverages played a role in lifting PET prices in 2022, as well as a lack of new capacity and freight and logistics challenges.
Against a backdrop of little to no new domestic capacity, U.S. imports of PET resin were up almost 13 percent in the first 11 months of 2022. Imports in that period totaled almost 3 billion pounds, according to U.S. Customs data cited by research firm PetroChem Wire.
Mexico was the largest source of U.S. PET imports in the first 11 months of 2022, accounting for a little more than 21 percent of the total. The next four largest sources in that period were Taiwan, Oman, South Korea and Vietnam.
Current North American PET resin demand "is sluggish," said Mark Kallman, a market analyst with Resin Technology Inc. in Fort Worth, Texas. "Downstream [PET] products are well stocked. Everyone's looking for [resin] demand to pick up. It's OK, but not great."
In feedstocks, oil and natural gas prices both declined in January. West Texas Intermediate oil prices opened the month near $80.30 per barrel and by the end of the month were down almost 2 percent to $78.90.
Markets for natural gas — used as a feedstock to make PE and PVC — took a much larger plunge because of warmer-than-expected winter weather. Prices for that material started January at $4.47 per million British thermal units but plummeted 40 percent to $2.68 by the end of the month.